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

To: Bridge Player who wrote (5631)	3/27/2000 4:40:00 PM
From: edamo	Read Replies (2) \| Respond to of 8096

bp...."at what price seriously concerned" let me stand upon my soapbox as if in hyde park corner.... look at options several ways, especially in the sense of objective. ltbh objective/stock substitute: there is point where a diminishing return occurs, in essence the upward trend stalls and perhaps reverses. this does not bode well for any call buy, which disputes the "i've never seen a call or put premium that i don't like" (paraphrase a bit), but you get the downside of a straight "buy side" mentality,which tends to eat up with time, your ability to exceed the premium that you have paid. conversely a slight down to flat trend does not preclude sale of puts. short term trade: this is where skill, and intimacy of the many factors of the underlying and its delta to the market is a necessity. nothing goes straight up or straight down, there is a wave like motion that is created by the ebb and flow of supply/demand. price of the underlying is irrelevant, it is merely the timing of entry at oversold/overbought moments. you tend to look more at the relationship of the premium to the underlying, along with time. insofar as technicals as it applies to options, you should be more concerned with momentum and trend reversal instead of the typical "breakout" situations a purist tries to establish. i wouldn't go long a stock until it breaks out of a base, but would entertain any option entry based on overbought/oversold status, regardless of if its on the shoulder, at the head or climbing the wall of the teacup.... options are finite, they give you more latitude in timing then the common due to the inherent lead/lag factor. returning to your original premise, i fail to consider that any money manager or even proverbial bear as abelson would fly eternally in the face of strong fundamentals. consider what the market has done to valuations...they now become relative....what is truly high? a csco at 200 is valued much higher then a smokestack at 6.....but how much steel can a stack produce and sell, during full economic cycles? compare with the necessity of technology that is required to grow not just our home market but the world economy. things have changed, those that have not learned from history are destined to repeat it.....but what we face now has no historical or empirical data to support same. business is still business, real world can't be perverted as markets and stock values are....all this to say in conclusion, valuations aside, a company must have revenues and more importantly solid profits to survive in the real world......given these required basics in the real world, then allow fantasy land to value in its relative fashion... almost a reversed way of determining value...start with the nose bleed high or non existent pe, low revenue companies and find the relatively high(per historic standards)billion dollar revenue(not market cap) plus continual quarter after quarter profit growth entities and believe in them.. it's going to get tougher going forward as the junk falls by the wayside....

To: Bridge Player who wrote (5631)	3/27/2000 5:46:00 PM
From: Seldom_Blue	Read Replies (1) \| Respond to of 8096

Is there ANY market price at which you would feel that this company no longer warranted a sell-put/buy-call-or-leap strategy, a price at which you would become seriously concerned about the future of your holdings in such a company? I do believe there IS a price at which a company will no longer warrant a buy. My feeling is that CSCO is approaching that number. Of course one should never bet against CSCO, but the valuation of that company, with the growth rate they have to maintain, is hard for me to swallow. Can you imagine the price double in a year? If the answer is yes, how would you arrive at such a price or valuation level? I would look at their market, the growth potential of that market, the potential that was already priced into the stock. I would look to see if that stock can double or triple, and still have a reasonable price/vision ratio. If CSCO triples, it would have the combined value of CSCO, MSFT and GE today! I just do not see that happen in the next several years. That is not saying much, but market valuation of these stocks are beyond reasonable in my opinion. You are asking some good questions. But the question I will first try to answer is "Do other people think this stock is overvalued?" The answer to this question will determine the short term price trend.