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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Eric K. who wrote (116296)	6/18/2000 8:16:00 PM
From: Elmer	Respond to of 1572449

Re: "A strategy of buying naked out-of-the-money calls would also not bump into any margin limits" "Buying naked calls"???? That's a new one. And buying calls certainly will effect margin if you're using margin to buy them. Re: "What is so conservative about a fixed upside, massive potential downside investment?" I don't believe the risk is that high. AMD has established credibility as a CPU supplier and with the worldwide demand for both CPUs and Flash, I see little chance of a major downside in the short term. Except for some leaps at low prices I write only one month out, giving myself little time exposure. I don't usually write them near the money so even a 10%+ drop in price isn't a threat and if threatened I can roll them out. With substantial margin I can write a lot of contracts. It's been working very nicely. I hope you can say the same. EP

To: Eric K. who wrote (116296)	6/18/2000 8:35:00 PM
From: minnow68	Respond to of 1572449

Eric, You wrote "And I would define a strategy of writing naked puts ... as fairly heedless of wealth preservation" Indeed it is. Let me emphasize up front that I intend this entire post to be one extended agreement with your point. You are correct. You are quite correct. If my memory serves me correctly, there was a gentlemen in New Jersey who in October 1987 lost his entire fortune (something like 68 million) in one day when the stock market crashed. He made, and lost, his fortune by extremely aggressive put writing. When the market fell more in one day than it ever had, it broke him. While I admit that I've written puts on AMD (the only time I have ever done this), I also own the stock and own calls on it. I consider the put writing to be, BY FAR, the most dangerous investment activity I have ever undertaken. If someone does not understand the concept of gambler's ruin, they should not be writing options. Mike