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Strategies & Market Trends : Steve's Channelling Thread -- Ignore unavailable to you. Want to Upgrade?

To: JOHN N. who wrote (15227)	5/1/2001 1:51:48 PM
From: Jacob Snyder	Respond to of 30051

I've been using at-the-money 2002 options. They move about twice as much as the underlying stock. So, for instance, when I bought TXN calls (stock at 30), and sold them when the stock hit 36, the stock had a 20% increase, while the options had a 40% increase. It works in the other way too, of course. The main reason I use puts instead of shorting, is that there is a pre-determined max loss I can sustain, if I guess very wrong about where the stock is going. A disciplined investor would decide a stop-loss price when he initiated the short, and rigidly stick to that discipline, thereby always avoiding a large loss on any short. Having done both (shorts and put LEAPs), I find I am more comfortable with puts. With the spread, it is only worthwhile if you are aiming at large moves in the stock (20% or more).