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

To: tekboy who wrote (7635)	5/6/2000 9:54:00 AM
From: edamo	Respond to of 8096

tekboy..."underwater leap calls" market closer to the bottom then top...bad time to sell common stock that you feel has sold off for no real fundamental reason....but remember the leap is finite and even as stock moves up, your leap premium will erode due to time factor... inspite of what is constantly posted there exist no "repair" strategy for a purchased option...you can only "repair" sold options....hit the reference books and you will discover this...when you attempt a "psuedo repair" of a long call it at times entails loss of capital, which in a less then strong momentum up market will cause a total loss.. you are learning the risk of options...

To: tekboy who wrote (7635)	5/6/2000 10:41:00 AM
From: Tom K.	Read Replies (1) \| Respond to of 8096

... What would the most sensible thing to do with these .. A lot depends on what your original objective was for the purchase and why that may have changed. I've not personally had this situation so I'm not speaking from experience, however, you could consider.... Sell the Jan 220 CALLs back = +18.5 Sell the Jan 220 CALLs again = +18.5 Buy the Jan 210 CALLs = 20.75 This would leave you with a spread at +17.75 (less your original cost). In any case, that should position you to be that much better off than where you are now. If the stock rallies above 220, you get the spread value for an additional +10. If it stays down, you have capped your loss at less than what it is sitting with the plain LEAP. Again, I've not done it so I'm only referencing my limited knowledge, but this might trigger some additional thinking regarding alternatives. The real key is to revisit your objective for the trade in the first place. Good luck. Tom

To: tekboy who wrote (7635)	5/6/2000 2:47:00 PM
From: PAL	Read Replies (1) \| Respond to of 8096

tekboy: as ed posted, there is not much you can do especially since it is jan02 leap. if you own call which has a near term maturity, in some cases you might be able to roll it down and out to reduce or loss or even to avoid the loss while wait for the stock to recover. in a beginner's option class, they always stress that the buyer of an option has all the choices while the seller has only one choice. They forget to say that an option seller has a repair strategy more so than an option buyer. i don't know what your cost basis is on that qcom call jan02/220. have you considered just taking the loss and move on? if you like qcom at 220 + call premium in jan02, and in your view qcom is only going to get better (i am bullish on qcom although i still question their spending on netzero - i hope qcom is not trying to be a hero and ending up a zero), do you like qcom at 103 in jan02 (right now qcom is 109 3/4). if the answer is yes, and i if am in your place, i would do the following: a. close my jan02/220 call and get 18 1/2 b. sell jan02/220 put at 117, collect $ 11,700. c. wait for qcom to recover and might close the put when the time gives you a profitable opportunity. that money will earn interest in your margin account. caveat #1: naked option is risky, and make sure you have the ample margin capacity to maintain. caveat #2: not intended as an investment advice. Good Luck Paul