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Strategies & Market Trends : The Options Box -- Ignore unavailable to you. Want to Upgrade?

To: smchan who wrote (10734)	5/6/2001 10:38:36 PM
From: Dr. Zax	Respond to of 10876

here's a thought (and what I'm currently doing) IFMX - Just announced a major restructuring, including the sale of their DB unit to IBM. The new IFMX is no longer a database company, they have some good aps and long term will be a good one to hold. The stock dropped from 7.5 to 5 on the news of the buyout. While trading at 5, there's lots of uncertainty about where it's going. August 5's are trading at $1 . 20% is not bad for 3 and a half months. Just a thought, and my current play Dr.Zax

To: smchan who wrote (10734)	5/7/2001 10:40:31 AM
From: Poet	Read Replies (1) \| Respond to of 10876

Good morning Sam, First, never put yourself down for the size of your portfolio. I'd bet that ALL of us are trading/investing with a lot less money than we were a year or two ago. I know I am. Buying a solid stock and writing a covered call on it, keeping in mind that you could get called, is an eminently reasonable play. I'm not a big fan of writing LEAPs calls on stock because it's less lucrative than writing them closer in. Here's an example: Buy CSCO at $19.50 Sell the 2002 20-strike LEAP @ $4.80 In this scenario, you're sitting on a relatively bearish play on CSCO, essentially saying that you don't think it will be much above $20 in seven months. You'll make about 25%. Scenario #2: Buy CSCO at $20 (current price this morning) Write the June $22.50 call (CYQFX) @ $1.30 (a 6.5% return) If you did this, writing a close-to-the-money covered call every two months, you'd make a bigger profit over the long term, but it would involve more "work" on your part. I like your thinking on this, Sam, particularly since I've repeatedly read that we're likely to see new lows this fall.