Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Poet who wrote (2817)	2/12/2000 9:07:00 AM
From: avanti77	Read Replies (5) \| Respond to of 8096

<I had taken the premium I had gotten from the put sale and had bought JDSU Mar 200 calls at $30.> Question, Poet: Why buy calls, if writing puts offers a very nice premium, and a bit more safety? Also, and this is open to all who want to share their input; I've noted that the info shared on JDSU put writing in the near term (Feb. and Mar.) is generally being done around the share price of 195-200. In regard to longer term (Sep.), I've noted Ed, Pal, and Jill had mentioned writing the Sep. 200 as well. I realize the 200's offer a very healthy premium, however, if I anticipate JDSU share price to move upward over the next 6 months, should I also consider writing the Sept. puts at a higher price? For example, the Sept.240's have a premium of about $70. If I got the stock "put" to me in Sept, I would effectively be paying $170 a share. Your thoughts? All responses welcome! TIA. Donna

To: Poet who wrote (2817)	2/12/2000 9:46:00 AM
From: Jill	Read Replies (2) \| Respond to of 8096

PAL has an elegant way of taking cash in and using it to buy stock or calls--and calculating a trade for a trade, so to speak. On the other hand, cash in has other purposes as well: 1) You can apply it to the cost basis of your stock, thus reducing it. For instance you own QCOM, you sell puts on QCOM, and you simply consider that cash as a way of reducing cost basis and increasing profit. Same for covered calls. 2) You don't have to do an eye for an eye...your trade was fine, it's more the premium you get based on volatility/timing as ed points out, AND the strike price you choose that are important.

To: Poet who wrote (2817)	2/12/2000 12:29:00 PM
From: PAL	Respond to of 8096

Poet: Yes, I'd love to hear your thoughts on choosing the month of expiry.. I'd chosen to sell March puts because they seemed to be "juicier" and bought March calls because we were close to Feb expiry and I was concerned about the ramping up of time decay. Am I on the right track? Yes you are on the right track. Your moves are close to that of a very experienced option trader. See my post to Jill about using just a portion of put proceed to buy call. As far as choosing the month of expiry, it comes down to your other field of expertise: psychology. Let us compare: A:- sell feb200 put at around 5 (as it turns out ed already has sizable short positions for march puts, this additional feb puts are just some crumbs: his moves are uncanny and as smart as a fox!!) B:- sell mar200 put around 18. Person who chooses A expects that that next week he/she can laugh heh heh heh , the option expires worthless, i win, i thank that poor guy who bought my put. there is something about winning: it boosts once's ego, and fulfills one of human needs (maslow(?)). Choosing B: observing the decay rate, march option will probably drop more than $ 5 next Friday conditio sine quanon. this person will not say heh heh heh , yet makes more money that if A was chosen. Like the old adage: you can have the heh heh heh , but let me have the more money. The above is if things works out for Just Don't Sell Us, i.e. if the stock remains above 200. How about if the stock heads south. Well, A has 2 choices: be assigned, cover the option while B can have 3 choices, the third one being : do nothing, still one more month to go. As for being assigned next week: one can rationalize: well I got at a good discount $ 195 ($ 200 minus premium). What if next week jdsu is at $ 170, that good discount does not look good anymore. One main thing I don't like of purchasing stock as a result of an assignment is that you don't control when you buy the stock (it is dictated by the option holder), and the discounted price (i.e. after premium) is more of than not is higher than the prevailing market price. I prefer to buy when I want to buy and pay the price I want to pay based on what the price at that time. Paul