To: JustLearning who wrote (1805 ) 1/27/2000 5:46:00 PM From: RocketMan Read Replies (3) | Respond to
Many of us on this thread are just learning, and sharing thoughts. As far as my thoughts on buying 120 vs 200 qcom calls, the advantage of the 120 is that it has more leverage. An upward movement in the stock at the 120 level will appreciate the 120 leap much more, proportionately, than it will the 120 leap. The disadvantage is that it is more expensive. The alternative is to buy more 200's, but that is rislier because you are ATM, so there is more of a chance that the stock will not get that high and the leap will expire worthless. This is the theory according to Roth, he discusses it on page 47. Where I disagree, however, is that I don't think the volatility or upward potential of a company like qcom is fully priced in the leap call. Obviously, this is a matter of opinion and I am betting against the call seller, one will be right and one wrong. However, for a stock that has already touched 200, even if momentarily, and that is growing its earnings at least at 50% per year, with the potential of much more than that with HDR, I think 200 sometime this year is a slam dunk, with another year to go on the 2002 leaps. So buying that far OTM is not at risky, IMHO, as Roth would have you think, at least on a qcom. That having been said, I don't think I would buy 200s right now, I would buy more like 130s or 140s because their premium has probably degraded more than it should for this (IMO) oversold condition.
