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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: edamo who wrote (32378)	3/5/2001 10:59:13 AM
From: Jill	Read Replies (1) \| Respond to of 65232

Hi ed...premiums definitely are inflated lately, and it does seem a good idea to watch the premiums and take advantage of the volatility, I remember you used to do that with puts also, sometimes even if the stock goes slightly against you, you can still make a profit on buying back whatever you wrote (call or put) I think it just takes that discpline that sometimes its hard to have in this market Horror stories: Talking to my acct about what happened to some people in 99 and 2000, esp those who didn't have mark to market, they made a million or whatever in 99, but must've been on margin, anyway in spring of 2000, meeing margin calls, they deferred taxes hoping for a rebound, but instead market continues to go down...some people are wiped out and will have to declare bankruptcy--he has clients who held from 150 down to 8 on whatever stock (those were #s he quoted) I guess part of managing trading is taking the long view on what profits and losses you might have, the leaps, you get the $ but until you close the position, you don't have to pay taxes on it, and can put it to work---------

To: edamo who wrote (32378)	3/5/2001 11:57:57 AM
From: FR1	Read Replies (1) \| Respond to of 65232

I agree and I think things will flatten out. Even if we get a strong recovery the curve will not be straight up for long. Do you use some kind of metric to decide when the premium is right for selling a call? After all, a $1/share premium is not enormous considering how BRCM, AMCC or somebody like that would have a much higher premium (and a much stronger potential downside). I have always been confused on how they decide the premium. I once looked up the calculations used and saw how they used Black-Scholes, etc. In the end, however, they say something like "After all these calcualtions, the floor person adjusts the premium to whatever fits the market at the time." So I gave up on trying to calculate premiums. It's hard for me to come up with a good strategy other than: "If the stock has run up a lot and you want to keep it, sell calls and buy puts." I am tempted to buy great leap calls on some tech issues like GLW (Jan '03 at 40). We have been down for a while now (lowering premiums) and a great leap gives quality names plenty of time to recover.