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Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: Mark Z who wrote (531)	8/13/2000 11:20:46 PM
From: KFE	Read Replies (1) \| Respond to of 1426

Mark, Can anyone explain what the benefit is of being able to buy a 'protective put' against shares in a retirement account? A protective put is bought to limit downside risk. Institutions buy out of the money puts(usually deep OTM) so that their maximum loss can be determined in advance and makes money management easier. It is sometimes referred to as "disaster insurance". Many times you will see a block trade of OTM puts and the message boards and option tout sheets will say that someone is betting big that the underlying is going to tank. Many times this is just an institution buying them to limit their potential loss on a stock that they are actually bullish on. No reason why you can't have the same solid strategy in a retirement account. You may ask why not just use a stop loss order to accomplish the same thing. It would not give the same protection because of possible gaps and for institutions with very large size to do stops are not as practical. If one believes their stock is going to take a hit, why not just sell the common? Absolutely, sell the common. Protective puts are bought on a stock that you are bullish on but just want to limit your losses. Regards, Ken

To: Mark Z who wrote (531)	8/15/2000 8:26:01 PM
From: gene_the_mm	Read Replies (1) \| Respond to of 1426

MARK... Unfortunately, investment strategies are not my forte, TRADING strategies are. However, IMHO, unless you buy extremely risky investments in your 401K/retirement plan, I don't see why you would want to purchase protective puts (unless you are very close to retirement now and are afraid of a potential crash)? Think about it... You should be buying what you consider blue-chips and 'tomorrows winners' in your retirement account, or funds that track these stocks. If you have 10 to 20 years or more to go until you retire, that is plenty of time to weather some bear markets and still beat bank interest rates (based on historical prices). What would protective puts do for you in the long run? Nothing IMHO. If you are buying extremely risky stocks in your retirement account (which IMHO would be unsuitable investments for a retirement account) than MAYBE you should consider protective puts... or maybe consider better 'retirement' investment. NOW KEEP THIS IN MIND FOLKS... There probably is legitimate, sound financial reasons for protective puts that I am not aware of. What I would do is have the brokerages EXPLAIN how you can benefit from them before you swear them off. Perhaps I am completely mistaken... Do your own due diligence and ask, ALWAYS. Great question... DANNOBEEE can you help here? All the best, -- Gene