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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: Dominick who wrote (9143)	10/23/2001 8:53:51 PM
From: James F. Hopkins	Respond to of 19219

Dominick; That was an old spread I opened on 8/16/01 buying 30s and sold 40s, What I did today was buy the 25s and close the 30s..in effect it made it like buying 25s and selling 40s, the caveat is that I sold those 40s back in August. I averaged down the low end of the spread but left the high end alone. ---------------------- Take back when I first opened it at +30 -40 the QQQ was selling for 39.56 well she dropped a lot since then at that time my break even on it was a qqq of 35.03 as you know she fell a good bit below taht, with rolling the low side down today I've made my break even at 33.47. ------------------------ One thing about BULL spreads I always do, is buy the low side when I know the market is moving UP, then sell the high side as soon as it runs out of steam. Often taht will reduce the cost of he spread, I don't ever open a bull spread if the market is moving down , I try to use the momentum to leg in. ------------------------- Back when I first sold the 40s they were bringing a good bit more than they are now, so in tampering with my spread I never buy back the high end. But sometimes I will roll the low end down if I get a favorable discount. ------------------ Spreads are a way of getting some leverage but with reduced risk , most of mine are defensive type plays where I buy deep in the money and sell just out of the money, thus my break even is 3 to 4pt below the current price. However being they are leverage if the stock drops to much you can lose all of your bet however it not going to be as much as just a raw option. Also I keep enough cash to roll the low side down several times if need be. In extreme cases I will convert the spread to a long with the covered call being the first high call I sold, by buying the stock and closing the low call I bought. Taht happens to be why I own CSCO and SUNW and GLW all of them were at one time spreads , but now they are longs with covered calls. <G> ----------------------- The high side call don't drop as fast as the stock or the low side call, so each time I roll down I take advantage of the next lower call having fell more than the one I'm going to (sell ) close. If a person has the dry powder and don't freak out on down swings it's an OK system. At least what I do own outright I own below the lowest price they ever traded. This is not to say I don't get a bad one from time to time I've had my share, you can count on taht but the winners will pay enough to over come the losers if Your Careful. <G> Say the QQQ was to fall all the way to 20, I'd likely buy her outright and close my 25s but leave the high side (-35 & -40 )calls alone, and just hunker down until they expired if she didn't get back up. You see I bought (two sets at dif times) both of them before the Sept low and the second set was a sort of average down (+25 -35s )...now I have all +25s but half have -35s and half have -40s. Jim