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

To: PAL who wrote (2564)	2/9/2000 12:38:00 PM
From: lurqer	Read Replies (1) \| Respond to of 8096

Thanks for the response. I've always considered the strategy to be a little "too cute". I'm a big believer in KISS. lurking... lurqer

To: PAL who wrote (2564)	2/9/2000 12:58:00 PM
From: Jill	Read Replies (2) \| Respond to of 8096

PAL, I've got to disagree with you. Given today's volatility you might pick the stock up for less but you're long the stock because fundamentals are good and it's in a breather. You can never time the market but if you pick a close strike price (ed for instance selling March 200s on JDSU) you most likely will keep the premium but if you get JDSU for 180 you're happy. That's not a bad price for JDSU and you could get it if the stock dipped to 199 and never retraced back to 180.

To: PAL who wrote (2564)	2/9/2000 1:22:00 PM
From: Bridge Player	Read Replies (1) \| Respond to of 8096

<< When you sell put to buy stock at cheaper price, two things can happen: a. the stock is a real winner, you probably won't get it. just keep the premium. if the stock is real strong, why not buy the stock outright (you can buy call s/t but the premium is expensive). >> PAL, this is a somewhat limited view IMO. Let me give you an example from a trade the Jill mentioned this morning. JDSU, JDS Uniphase, is a VERY volatile stock, in an extremely popular market segment, optical networking. It has had a huge run recently, selling as high as around 240 recently, and has strong buys by a whole host of analysts. As of a few moments ago, with JDSU trading around 203, the JDSU March 190 put was bid at 15 1/2. If I sell that put, and the stock is put to me, I will own 100 shares at a cost basis of $175. If not, I keep $1500. This is the idea of selling the volatility premium that edamo was so worked up about. (By the way, that 15 1/2 is ALL time premium). Now, frankly, for me, I kinda like the idea of selling the put as opposed to buying the stock (or the call for those so inclined). I would really much rather own that volatile stock at 175 in 6 weeks than pay 203 now. And if not assigned, I am real happy pocketing my $1500. For those inclined to buy the stock or buy calls, if the stock runs to 300, I say, more power to them. Congrats. Now, you may not like this strategy because you are afraid of a falling knife. But I think it is wrong to suggest that it is always wrong for others. Sorry for the lengthy post on a fairly simple trading concept. BP