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.

Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Stu E. who wrote (37965)	10/8/2000 3:01:44 PM
From: Sun Tzu	Respond to of 70976

I looked at some put strategies a few years ago and from what I remember for every bullish put strategy there was a comparable call strategy that was simpler to play. Similarly, for every bearish call strategy there was a comparable put strategy that I liked better. Also, I've found that trading the spreads has much better risk/reward ratio than a simple buy. For example, I think you can buy as Jan02-50C and sell a Jan02-60C at a spread of about $2.50. So if at some point within the next 2 years AMAT hits $90, then you can close the position for about a %300 gain. Obviously the trade is most profitable if AMAT closes above 60 on the expiration date. But your profits will be fairly close to the maximum if the options become deep in the money anytime before then. But before you consider investing in options, you should familiarize yourself with how options are priced. Their pricing is relatively complex. At the very least you should get an option calculator and do some scenario analysis. Also, do realize that the option market is rigged against the individual investor. A good book on option strategies is The Option Advantage, but most individual investors will not be able to take advantage of the strategies suggested there (unless you have a very good broker that specializes in option trades). ST PS. I don't have the option numbers in front of me, so check them out for yourself. The example I gave should be fairly close to reality though.