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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: Poet who wrote (1496)	1/22/2000 8:30:00 PM
From: James C. Mc Gowan	Respond to of 8096

Poet, thanks for your welcome and kind words; I'm definitely in the novice camp and simply thought that a walk through might be instructive to others. As to the QCOM Jan2001 leaps; e.g. ZLUAU/Jan2001 S/P 37.50 Current Bid @ 118.75 and Q at 154 15/16; so the value to sell at the current bid is equivalent of 156.25, and this is only 31.25 cents difference from closing Q price. Since my cost basis for leaps is very low, by exercising around the time of earnings announcement, to hedge the "sell the news" possibility, or usual April/May Nasdaq annual decline, I now have the covered call option available to me. Now I might get lucky, if I were selling the leaps(which I won't; I plan to exercise for shares eventually, anyway) and get the current ask price, which is 121.375, and this is equivalent to 158.875, or a premium of $3.93. So, one way of looking at it, since you cannot get margin against the leaps, is to go ahead and exercise early, before the 9 month time decay curve starts to kick in. As I'm thinking the earnings will be strong, but the tech stock indices are at all time highs, there will be a typical 10 to 30% correction in NDX, which will impact QCOM along with the rest of our favorites, and I have more flexibility to hedge with shares than simply riding out another likely rapid hit, like we just had. When I looked at both bid and ask on these Q leaps recently, they didn't even had much time value on the ask; it's gone up with the rise from 140 to mid 150's this past week. Psychologically, I do note that I worry less about the price of DITM leaps on Q when corrections occur; the fact that they trade infrequently is actually a plus, as you don't notice their reaction to the common price fluctuations when they only trade but once every week or so. I digress from topic, but these are the ruminations that we must suffer through, having bought into Q early. Like this friend, who knows I have made a ton on the Q, told me the other day, when I was whining about the need to hedge and protect gains, "you poor baby"<ggggg> Regards, James