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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (79206)	4/8/2000 8:11:00 AM
From: Terry Maloney	Read Replies (1) \| Respond to of 132070

Michael, following up on Sanjay's question on thirds ... I got a vivid demonstration of one basic reason when RMBS moon-rocketed last month, just after I'd bought a first third of puts, and I only lost a third of what I would have otherwise. This would obviously apply in reverse, in the sense that at least you'd be 'in' in the case of a sudden plunge ... But in more normal circumstances, how do you decide on second (and third) thirds? For instance with puts, if the stock price stays flat, do you buy a second third closer to expiry, thus saving some time premium? If the stock moves up, do you buy a second third at a correspondingly higher strike? If the stock moves down, do you buy at a correspondingly lower strike, or do you pay more for the same strike price? Or is it all just a matter of gut feeling? <g>