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

To: Dr. Id who wrote (6183)	4/7/2000 7:08:00 PM
From: Jill	Read Replies (1) \| Respond to of 8096

This thread will prosper and flourish, I'm sure. Stop worrying, you guys, and start talking about the market! How's that for cops & robbers. Meanwhile, here's a funny post. This guy says some things that makes sense, such as buy options a few months out (I do at minimum) but he's flat for the year, and up 80% last year (a good deal less than many of us). So does he know what he's doing? Fed up with volatility? Try options By Michael Molinski, CBS MarketWatch Last Update: 6:55 PM ET Apr 7, 2000 Mutual Fund Center Personal Finance News San Francisco (CBS.MW) ? Fed up with the recent volatility in the stock market? Try trading options, says George Fontanills, who made an 82-percent return last year on the all-options hedge fund he manages. "With options, you can make money in an up market, a down market, or a sideways market." George Fontanills Buying and selling combinations of ?bull-market call? and ?bull-market put? options over 60 or 90-day periods can allow investors, even small investors, to profit from the overall up trend in the stock market without having to worry as much about the short-term volatility, Fontanills said. Options can also provide protection against a portfolio?s downside because the potential loss can be limited, moreso than with outright ownership of stocks. ?Let?s say Broadcom is at 150 and you think it?s going up,? Fontanills explained in an interview with CBS.MarketWatch.com. ?You could do a bull-market call by buying a 150 call option and at the same time selling a call above market ? at 180 for example. The difference is my risk.? Interview with George Fontanills Fund manager George Fontanills discusses how to use options to offset market volatility. Click below to play Get Real Player See in new window But there?s plenty of things to watch out for. ?Too many people are doing ?naked? puts, and then getting hit hard when the market drops," Fontanills says. "I heard some unbelievable stories on Tuesday of people losing big money on options because they didn?t know what they were doing.? A "naked" put is a put option without a corresponding long position in the stock to act as a hedge. Another common mistake is buying and selling options with 30-day strike prices. ?That?s too short in today?s market. They should be buying 60-day, 90-day or even longer," he said. "That?s a mistake most people make when they start off trading options.? While options were originally designed as a way to hedge risk, too many investors wrongly use them as a way to speculate. During the volatile past couple weeks, "If someone had a straight market position, they were panicking," while people invested in 60-day and 90-day bull-market options were able to "sit back and let everybody play their game," Fontanills said. Fontanills, whose $16 million fund is about flat so far this year, said he makes most of his money trading options in big technology companies. Among his favorites: Broadcom (BRCM: news, msgs), Analog Devices (ADI: news, msgs), Advanced Micro Devices (AMD: news, msgs), Qualcom (QCOM: news, msgs) and CMGI (CMGI: news, msgs). Options trading has also become easier for small investors due to the increased options research that is available online, Fontanills says in his book, "Trade Options Online." "Just a few years ago, the information needed to exploit the vast earnings potential of options was beyond the reach of all but a handful of analysts. Now, anyone with a PC and a few basic software tools has direct access to all the up-to-the-minute market information needed."