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.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: sammaster who wrote (31335)	10/25/2000 6:54:30 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 436258

i always own a few ootm puts in stuff that has risen because it's considered defensive...i choose the particular issues more on whim than anything else, and tend to swap successful positions into new ones of a similar nature. there's two things one has to consider...firstly, the probability of success is not as high as with the more volatile riskier stocks...and secondly, the puts are very cheap, which balances the probability problem somewhat. one interesting element is also that since these stocks have been driven higher in light of their defensive nature and perceived lower risk, the risk of owning them has actually increased. anyone who hears an 'analyst' reco-ing utilities at this point should remember that same have just had their second best year since their inception in '29. remarkably, the only year in which they DID actually do better (from low to high at least) WAS '29. these recos which are made now are imo top-of-cycle phenomena. in other words, they are probably wrong NO MATTER what happens to the major indices. because: they are now crowded trades, and a good deal of the money sitting in them is 'flight money' from tech. if tech rallies, the flight money will leave the defensive issues, which won't be good for them. otoh, if the general bear malaise continues, the increasing valuation gap between defensive stocks and the overall market will soon widen to the point where they can't be considered riskless anymore.... so considering all that, puts on defensive issues could well work better than their low prices imply...