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

To: that_crazy_doug who wrote (117187)	6/22/2000 4:42:00 PM
From: kash johal	Respond to of 1570977

Crazydoug, re:"Say Dresden bombs out and AMD goes down to 30. If I had put $1000 bucks into AMD at 90, I'd have 1/3rd of my money. If I put $1000 into AMD calls when it was at 90, I'd probably have near $0. If I recieved $1000 in premiums for puts I wrote, (depending which ones) I probably owe several times the initial premium. I don't see how that is inherently safer in a meltdown, but maybe I'm missing out on something big here." You are comparing apples and oranges. Lets assume AMD is at $100.00. And assume that the put premium is $10.00 for coming month. With a hypothetical $10,000 you could buy 100 shares. Alternatively you could sell 1 put contract ( for the same 100 shares) and pocket $1000.00. Now if the stocks gets slammed, you ALWAYS lose more money if you had simply purchased the shares. If the stock moves up your gains are limited to 10% over the hypothetical $10,000.00. In fact selling puts is a GREAT way to buy into a stock CHEAP. You can simply keep writing puts every month until stock drops and u buy in - all the time pocketing the premiums. I realize that some folks here have tremendous expectations of gains, but 10% per month compounded is a pretty good deal. The key is NOT to sell a huge number of contracts such that one is overextended if the price does dump. regards, Kash