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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: marcher who wrote (81272)	5/29/2000 6:20:00 PM
From: Knighty Tin	Respond to of 132070

marcher, there are no real primers on credit spreads, T-Note and Bond buy writes or paired trades, which is one reason they are so profitable. I can give you basics, but the only way I know of to learn them is to figure the components and work out the ramifications. Here are the very basics on these: 1. Credit bull and bear spreads. I use Leaps for these due to much higher premiums. Basically, you short the at the money option and buy one on the same stock further out of the money. How big a differential between the strike prices is determined by how sure you are of your direction. In extreme cases, wide spreads resemble a short option with catastrophe insurance. My spreads tend not to be so wide. Lucent is one I have often used in these trades. 2. Paired trades are simply long one stock and short another in the same business. The example is long Exxon, short Texaco, or vice versa. Unfortunately, this ONLY works when you receive a healthy rebate on your short proceeds, something very rare in today's market. 3. The long bond buy writes are just like stock buy writes, except that US Treasury notes and bonds do not become worthless overnight. At some point, they always reach par again. That means that the risk, and, alas, the premiums for taking that risk, are much lower than for stocks. I like Nucor. I hate Daimler/Chrysler with a vengeance, like Flex as a co. but hate the bloated stock price, use Lucent only in protected situations or long puts, as it is a scammy co. which has to come down even more, and don't know sabre as a stock.