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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe -- Ignore unavailable to you. Want to Upgrade?

To: Uncle Frank who wrote (37)	8/13/2001 7:37:09 PM
From: RGM	Read Replies (3) \| Respond to of 1064

I don't know if I'm interrupting a dialogue, but I have no problem whatsoever in writing naked put positions at the exercise prices that I would like to own certain stocks at. For example, if the following naked put positions were exercised between now and their respective exercise dates: ORCL Mar2002 $15 puts - my net cost would be 11.32 a share. I plan to add to this position if ORCL dips below $15; CVS Jan2002 $30 puts - my net cost would be 28.80 a share; LXK Jan2002 $30 puts - my net cost would be 29.12 a share; SMH NOV2001 $35 puts - my net cost would be 33.02 a share; SMH Feb2002 $40 puts - my net cost would be 35.20 a share; AMD Jan2002 $15 puts - my net cost would be 12.70 a share; AMD Jan2002 $12.50 puts - my net cost would be 11.40 a share; AMD Jan2002 $10 puts - my net cost would be 9.35 a share and DCLK Jan2002 $7.50 puts - my net cost would be 6.72 a share. If a stock gets "put" to me and then trades below the .75 cent lower boundary of its option price, I intend to short this stock in my other brokerage account for the same number of shares that I am long ("boxing it in"). During the bull market, I used to short overvalued stocks. Sometimes they didn't behave, so I boxed it in until the momentum players went away. My time horizon on selling naked puts is no greater than a 6 - 9 months. I believe the stock market shall take a significant dip during October from bad economic news or crisis in Japan, so, on certain high beta tech stocks, I may use some of the proceeds from the sale of Jan or March 2002 put to buy a higher price Oct 2001 put if I feel more uncertain about the fundamentals and/or industry sector of that stock. Rob

To: Uncle Frank who wrote (37)	8/14/2001 8:24:13 AM
From: edamo	Read Replies (1) \| Respond to of 1064

uncle..."selling puts"... the risk/reward ratio is within your control, dependent upon when the position is set, based on a potential momentum indicator reversal... true with support levels being breached constantly, the put sale is much lower risk then attempting a buy/write...which many on your thread are espousing....the buy/write in a downward trending market is a bit of lunacy as you are starting with a diminishing asset and trying to stay even...all the time cash out... the put sale first affords cash in, and a delay to purchase that which you want...but you are controlling it... real world...jnpr at 46 on 6/6...sell the jun35 put with two weeks to go and scalp .25...the stock tanks is at 31.50 on june expiration, cover and write the july 35 for a net credit of 1.90...stock continues to fall and on july expiration it is at 24.26....reset with oct35 for a net credit of 1.30... at the moment cost if assigned is 31.55..against a 23 common price...still no cash out, cash in, and only an economic obligation backed with cash.....the buy/write or long position at 46 is not as well off... with options, timing is the difference between profit and loss...refer to my atml example....the discussion is about capturing abnormal volatility... the sell side gives a fall back position when cash collaterilized...