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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: KevinMark who wrote (116259)	11/8/2000 11:01:52 AM
From: Dave Gore	Read Replies (1) \| Respond to of 120523

Kevin, buying options is very tricky. I could talk to you for hours about the risks. You have to be extremely quick and un-emotional to cut losses quick and take gains quick. Sorry to be so serious and you may very well be aware of all this, but others may not be. If any think options are too tempting or easy, you better read the following and study up on them. Here's why: 90% lose buying calls or put options on stocks, I hear. I have found that the only time you can win big (but it is very risky) is when buy just before an earnings report with the options very near expiration. Of course, you have to be on the correct side of things or you may lose everything you invested. I used to do well with SUNW because they consistently beat and years ago the stock was not so volatile so the premiums were cheaper. Sometimes the common stock goes up and you still lose on your calls because the premiums were so high and expiration dates get closer every day (which slowly sucks the premium value out). Like I said, risky. The MSFT thing before and after the last earnings report was very interesting... I noticed MSFT had massive Call buying and took a chance but never expected such a quick and massive run-up. Frankly MSFT never should have gotten to 48 and never should have run up 20 points after earnings. I think it may have been a setup. I know... conspiracy theory stuff. About a week or two ago, I began to feel the same way about AOL, when it was well under 50. Although there was no impending earnings play, I felt that many Fund Managers and other big players (i.e. analysts worknign for big brokerage houses) really wanted to own this and felt that it had been beaten down enough, especially with some decent dot-com earnings reports that were starting to come in. So I bought some calls. The premiums weren't too bad, especially compared to Yahoo. Puts and Calls have very high premiums in the tech sector. I bought some PFE calls yesterday only because I thought Bush would win and because the premiums were so cheap. But am out now. I may wish I wasn't but I'll take a small profit. Bottom Line - IMHO, I would be very careful with options. Do NOT get greedy and do not be afraid to take losses if it starts to go against you. There are also many other ways to play options, including selling covered or naked puts and calls, and tons of combinations. You better study up if you want to play them. Again, sorry for the long answer, which I know most people hate, but I don't want anyone to get burned as badly as I did when I first started playing options.