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

To: RGM who wrote (38)	8/13/2001 9:48:32 PM
From: Uncle Frank	Respond to of 1064

>> I don't know if I'm interrupting a dialogue... Your comments are most welcome, Rob. I believe that Dan set this thread up for exactly this type of exchange. Your assumptions and strategy seem well thought out, including a plan should you be assigned and the stock continue to dip. Excellent contingency planning. uf

To: RGM who wrote (38)	8/14/2001 12:00:18 AM
From: Thomas Tam	Read Replies (2) \| Respond to of 1064

My only concern with the naked puts is the margin equivalent that must be set aside until the option expires or the stock is put to you. That can be a major opportunity cost should a new opportunity present itself from now until the put expires. Of course you can also close out your position earlier, but I wonder if anyone else takes this into account. Later

To: RGM who wrote (38)	8/14/2001 12:09:24 AM
From: Dan Duchardt	Read Replies (1) \| Respond to of 1064

Hi Rob, Thanks for your input on the short puts. We are interested in all kinds of option strategies here. I wonder if you could expand on your boxing strategy, and answer a couple of questions 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") If I understand you correctly, you are selling OTM puts at premiums in the few dollar range several months out. I don't get what you are referring to with this .75 cent lower boundary. Is it really 0.75 cent, or 75 cent (I think I know this one <gg>? Is this value really something in relation to an option price, or is it related to the option strike price? What would make sense to me, but I'm not sure it's what you are doing, would be to go short to protect against buying stock at a price well below market as soon as the price of the stock falls into the area of your breakeven price. So, for your ORCL you might short at around $11.32. Then if the stock continued lower and was eventually put to you, you would break even. What seems even more attractive is shorting near the strike so that as time passes you will at least profit in the amount of the premium. If this is what you are talking about, then my next question is why what do you do if the stock dips to where you go short, and then rises? Do you try to cover if you think it has bottomed, or cover at breakeven, or give it more room? I wont ask anymore until I understand what it is you are actually doing. Sorry, I'm just not seeing it. Dan