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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: Geof Hollingsworth who wrote (1864)	2/27/2000 4:59:00 PM
From: Dan Duchardt	Read Replies (2) \| Respond to of 2241

Anyone have suggestions for how to play the TERN puts? Don't buy them, IMHO. The stock would have to give back too much for you to hit breakeven, or make a nice drop quickly to take a fast profit. The short interest was high at the last report, and perhaps the run-up has been driven by a short squeeze, but if not one is likely to happen if TERN moves higher from here. Way too scary for me to bet on a near term decline of the magnitude needed to make money on long puts. I do think that in the long run cable is not going to be the internet interface of choice, but between now and the longest term puts available (October) I wouldn't fight the current trend. Seeing a reversal in the NASDAQ trend might change my mind, but by then TERN might not seem so lofty anymore. I might sell some OTM puts (if I had an account that let me) if TERN pulls back to around 200, and the Naz continues upward. A covered call position is more or less equivalent to selling a put, and looks like a reasonable play if you can catch the stock at or below this week's low around 230. I'd want a premium of at least 70 at that point, figuring the old high around 170 should be support. That would probably mean looking out to at least July for a near ATM strike, and a potential return of 70/160 = 44% over 5 months. That's not earthshaking, but it's a lot safer than buying puts on a high flyer in a growing business area. Obviously, this is assuming the stock will rebound if it does pull back to more "reasonable" levels. Dan