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Strategies & Market Trends : DAYTRADING/SWINGTRADING STOCKS with INTRADAY INVESTMENTS -- Ignore unavailable to you. Want to Upgrade?

To: Mark Davis who wrote (333)	6/25/2001 11:31:55 PM
From: -	Respond to of 565

When there's significant market risk, we hedge it off by buying a cheap call up higher out of the money. Essentially, it turns it into a poor-man's vertical credit spread. On any gap or other untold even, you're only at risk for the spread between the strikes minus the credit. e.g. right now we're short NVDA that way... if INTC were to come in with a $200/share tender offer tomorrow morning, no problem. -Steve

To: Mark Davis who wrote (333)	6/26/2001 12:02:56 AM
From: deronw	Respond to of 565

Mark, You bring up a very valid point. We sometimes will create a spread by also buying the calls at a higher strike price at the same time we sell the calls. However, we typically only do this with higher risk plays, such as when a company could be acquired. The likelihood of IBM having any such major news is very slim, so our risk is less. Nevertheless, your point is very valid. Also keep in mind that we do not limit ourselves to only selling calls. If we are bullish on a stock (such as in a bull market), we can utilize the same strategy by selling puts instead of calls. Still gives the same benefit of collecting premium. Deron