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

To: Sanjay Mazumdar who wrote (82174)	7/7/2000 5:52:30 PM
From: Michael Bakunin	Respond to of 132070

FD: I'm not the MB whom you asked. But still: if VERT goes to $100 in the next year, the call goes up, too, but not dollar-for-dollar. Close out both positions, and the gain on your stock more than makes up for the loss on your options. -mb

To: Sanjay Mazumdar who wrote (82174)	7/7/2000 6:35:27 PM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

Sanjay, You cannot do spreads in any IRA I know about. You can buy and sell options (closing sales only) and, of course, you can do covered call writing. You cannot do secured put writing, which is exactly the same thing, because the brokers and regulators aren't too bright. That being said, I know of two firms that allow you to buy long options in you IRA. One is Fidelity, which you already have. The other is Brown & Co. But as far as spreads go, I just failed today for the upteenth time to convince Brown to allow debit spreads, even if they don't allow credit spreads. No dice. With Vert, I would repurchase the $40 strike price call and sell the stock. Just because the stock is at $100 does not mean that the $40 call doesn't exist. It would simply be $60 in the money and you could buy it for $100 plus a very small pure premium, allowing you to capture most of the pure premium of the original trade. I always hope to unwind option spreads early. Vignette has been going the wrong way for the moment, but if it went up, I am much more likely to unwind early. What I do is set up a position where I make something like 40% annualized if the stock is the same price at expiration. If I can capture a major part of that 40% in much less time, my annualized return zooms. The maximum cap appreciation way to play Allaire is to buy a short term call and have the stock rise quickly immediately. However, it is a very high risk strategy. When I do this, I use my 90/10 method (for puts or calls) I keep 90% of my money in cash and put up to 10% in long options. That way I don't get wiped out if the stock doesn't move or moves the wrong way. But that is hardly a maximum return strategy. It is just a great return strategy. If you are absolutely convinced the stock is going up, one strategy I like is a lopsided long stock. With the stock at $45, you might sell a deep in the money Leap put option struck at, say $60 or $70 AND buy a Leap call at say, $50 or even $45. If the stock goes up, not only do you make money on your long call, but you capture a big, fat put premium. However, if you are wrong, not even Capital One will give you a credit card after you take your losses. <g>