Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : The Critical Investing Workshop -- Ignore unavailable to you. Want to Upgrade?

To: Dr. David Gleitman who wrote (28018)	8/6/2000 6:01:32 PM
From: mepci	Respond to of 35685

David: As I said earlier option buyers are net losers. Of course I already met two here and one on Dell board who seem to be quiet successful with option buying strategy. mepci is my company name. Stands for management engineering practices consortium inc. I plan to write a book called management engineering and theory of tolerances. More about it later. First about selling NTT (near term) calls. I know several people who are making good money selling covered ST calls. Typically they sell calls JOTM (just out of the money) calls with 6-8 weeks to go for expiration period. Some use stock to cover it, and some use the farthest LEAP calls to cover it. One very successful investor claims that his calls got exercised only once. Second: Selling puts. Selling puts and buying the farthest out DIM (Deep in the money) LEAP calls have been the most successful strategies. When you sell puts you are actually ready to buy the stock, but you want to realize the extra premium to bring the cost basis on the stock as low as possible. If you do these, you should immediately buy the stock and buy the put back possibly at a loss as soon as the time value is gone ( because if the stock price goes down overall price of put goes up and time value goes down). In addition you should sell more puts at a new lower strike price at JOTM(Just out of the money) strike. If you use margin money normally 55% equity is a safe place to be in. You should refuse additional opurtunities. Opurtunities always come, risk containment and cash management are more important. I am normally between 40-55%,. If I am at 40%, I know I can pull more money from other sources, if I have a margin call. Selecting strike prices: Professional option traders make most of their money from the time premium. If you want to take guess work out where the stock price is going to be next, JITM or JOTM strike points have the maximum time premiums. But selecting strike price depends on your overall strategy. More later. mepci