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

To: Poet who wrote (190)	5/11/2000 11:36:00 AM
From: Poet	Read Replies (1) \| Respond to of 10876

I'm pasting this post by Greg Mullineax on his thread this morning. He's a trader I really admire: To: Gregory Mullineaux who wrote (1554) From: Gregory Mullineaux Thursday, May 11, 2000 10:43 AM ET Reply # of 1566 Lesson from a market warrior Now that we have dropped and are in a bear market, I would like to make comment about not selling because of tax reason and what where some of the indicators of a top are. No one should use taxes as a reason to not to sell, if you feel the market or stock has topped you should sell it. A 33% drop in a stock needs 50% to recover it, a 50% drop a 100% gain, those kind of gains are going to be far and few between. Many of the stocks that have dropped will never reach their highs again. We had many indicators of a topping market that was in fact a blow off top, adv.'s far from the norm, insane IPO market, many stocks far from their normal trend lines, and splits galore. We even had investors saying that there is a new way to evaluate the price of equities, deluding themselves in to thinking, since it's a new economy, old rules do not apply. If investors failed to protect gains from the drop, or failed to have loss protection rules of selling losses before they get away, they should turn those mistakes in to positives and learn from them, so they don't make the same mistakes again. The next big mistake will be buying in too early, there are too many investor maybe even you, that want to get out, they will continue to sell causing the market to drop again. Could this be another bull trap this AM? The big difference between this drop then past ones we have seen in Sept/Oct is where this one came from. The market was way extended at the top from the linear trendline and has dropped back to close it in a very short time frame, setting up a large amount of over head resistance (investors that want to sell and are happy to get out with less of a loss or maybe a gain if they are lucky as stocks attempts to recover. So we need more back filling to remove the weak hands. We have to wait for signs of a slowing economy first before it's time to go back in. We got one little indications of that today with declining retail sales. I would rather see a trend develop, so maybe a few more months of data will be needed before we can say the fed has worked it's magic. What to do now? Since it's spring, it's time for spring cleaning, if you own companies that have declining % gains qr. to qr. in earnings, and the story has changed, it's time to use rallies to weed them out so you have cash for the next bull market that is sure to come! Start looking for stocks that have not dropped much and have already recovered, SEBL comes to mind, or ones that have started to go higher from an extended base, I haven't seen any of those yet. Don't get frustrated and walk away from the market, investors are getting a rare change to learn from a bear market and how they are resolved and more importantly how a new bull market emerges. Greg---> Still learning I will never stop I hope.

To: Poet who wrote (190)	5/11/2000 11:38:00 AM
From: y2kate	Read Replies (1) \| Respond to of 10876

Yes- is there a formula? Volatiliity plus time plus intrinsic (if any)- ? I just feel at the mercy of the MM's setting the prices. They seeem to 'adjust' the volatility and time premium any way they want to. It would be great to be able to calculate how far, how fast the stock has to move in my direction before the trade becomes profitable. Qlgc has been very volatile- it dove down from the 100 level to 60. Maybe it's best to wait and buy the calls after a day or two of consolidation, thus cutting down on the volatility portion of the premium. You're the best-thanks for the great thread!