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Technology Stocks : CMGI What is the latest news on this stock? -- Ignore unavailable to you. Want to Upgrade?

To: George K. who wrote (15931)	1/22/2000 7:47:00 PM
From: JavaGuy	Respond to of 19700

George, Java, I wonder if you see some calls and/or leaps that look particularly appealing to you now. That's the million$ question. There are more experienced option traders on this thread than I, perhaps they will contribute to your question... As for my take: I usually don't take much risk with options, so 75+% of the time I am a seller. Over time the sellers make the money in options. For me to take any long call position, I really need to see the volatility decrease, which in turn, will shrink the time premiums. When I do long calls or Leaps, I usually stay close to the strike price, and buy several months (years) out. This lets you get modest leverage, without necessitating an immediate move upwards. But it usually wont be a "home run". Very occasionally I would buy the way OTM calls, if they are very cheap, and I fully expect to lose the money completely, but want to swing for the fence Vegas style. An example of this would be if CMGI flatlines around 100 and I could get the Mar 130 calls for $2 or less. Currently I don't see any calls I want to own with the current premiums attached, although they are shrinking. If we stay around 120 for a while, I would look for the Jan01 120's for under $30. The nice think about leaps is that when the volatility returns to the stock, the Leaps will add time value and increase "point wise" faster than the stock. Then, when the volatility get out of hand once again, sell the calls (to close) and/or sell covered calls (to open). I believe Mark Peterson recently posted a good summary of the volatility/time premium issue around 3 weeks ago, it would be worth a search. Understanding this issue, to me, is absolutely key to successful options trades. I remember I had sold Jan 320's on CMGI on Dec 31 when the stock was around 270 (should have waited one more day...), during one day, I think in the 2nd week of Jan the stock was up ~$25, but the calls were only up about $1. The call holders must have been pissed, because the time value was just getting sucked out of the options. I eventually bought them back much cheaper than I sold, thus hedging the recent drop in the stock. I like the sell side because it is less critical to pick the tops and bottoms when the premiums are fat. Next time I long calls, I'll post it. Good Luck, -JG