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

To: Poet who wrote (6791)	4/21/2000 5:31:00 PM
From: Seldom_Blue	Read Replies (1) \| Respond to of 8096

I do not do synthetic short because one does have any protection on the upside. I know that is hard to believe these days, but stocks do go up. :-) If one is truly bearish, but do not want to buy puts because it is a debit transaction, one can do a bear spread with calls. Here is how: Using AMZN as an example. Stock is at 52 3/8. May50 is at 8 3/8. May 60 is at 4. Selling May50 for $8 3/8. Buying May60 for 4. Credit +$4 3/8. Max loss: 10-4 3/8 = 5 5/8 Max Gain: 4 3/8 If stock closes below 50, one gets max gain. If stock closes above 60, one gets max loss. If stock is between 50 and 60, profit or loss depends on where the stock ends up. One can maximize the profit a bit if the stock goes one way then the next by closing the profitable leg first. Then wait out the second leg. I am increasingly thinking about such strategy since I am still basically bearish about the near term. Are we still doing only G&K? Sorry, then I guess I will just hold or write CCs then :-). Above strategy is only good if you are REALLY sure of the direction of the movement. Seldom Blue