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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: StockHawk who wrote (22152)	4/4/2000 10:35:00 PM
From: BDR	Read Replies (1) \| Respond to of 54805

<<One strategy that intrigues me is an attempt to stratify the tech market into two groups. One group (our long term stocks) will be gorillas and kings - companies we expect to outperform the market, both by rising strongly in good markets and falling less severely in down markets. The second group (put candidates) would be comprised of companies whose overvalued shares or risky business models may tend to put them at peril. As Mobius said the other day (and as many others have said) C to C Internets would seem to qualify.>> I thought by holding Gorillas and Kings and shorting or buying puts on an index as a proxy for the second group I could accomplish what you are suggesting. I believe buying puts would use less margin than shorting but I am not sure about margin and indices. There are indices loaded with the flakier internet stocks but there isn't much liquidity there as far as I can tell. The members of the NASDAQ-100 club are no slouches but the majority are not G&K material. That is why I thought buying QQQ puts (much more liquid market) would perhaps be a reasonable compromise. Buying puts is going to cost you, no doubt about it. Buying way OTM puts is obviously cheaper but you get less protection. You then have to ask yourself what you want protection against? Buy near or ITM puts if you want to protect against every small perturbation in the market and pay through the nose for that protection. Or buy cheap, way OTM puts that won't do you much good in a 10% correction but will keep a roof over your head in the event the Big Kahuna strikes. It's like health insurance. A high deductible policy costs much less than first dollar coverage but most of the time you won't get to use it.