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

To: Jill who wrote (6632)	4/18/2000 4:58:00 PM
From: RocketMan	Read Replies (1) \| Respond to of 8096

I'd like you to teach me/us about put buying. Jill, I don't know if you saw this post I made the other day. I'm sure you could write up my strategy much better, but this was my attempt at what is essentially an intuitive strategy I am following: Message 13434361 The only thing I would add is today's experience. With QCOM acting like it was starting to run, rising from around 107 to 112, I bought at 112. However, not knowing what the earnings might be, I bought May puts at 100, one put for every 100 shares. The reason I chose 100 is that I have had luck buying about 10% OTM. At that point the time premiums are not nearly as high, and I wind up paying about 5%-8% of the cost of the stock. That means if it falls, I stand to lose 5%-8% of my investment at options expiration, but no more, since the put kicks in with intrinsic value below 100. The reason I chose May is that it is the shortest time out (forget April, it is here Friday), the time premiums are minimized, and it gets me through earnings season and the Fed's action next month. This afternoon QCOM dropped precipitously after I bought it, but it hardly affected me, as my put value counteracted the common loss. After hours it is way up, and my put will decline in value, but its rate of loss is much less than the rate of gain in the common. In summary, my strategy is to buy puts about 10% OTM about one month out, during times of high market volatility and uncertainty. Your mileage may vary.