Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Logain Ablar who wrote (5003)	10/26/2001 9:34:11 PM
From: All Mtn Ski	Respond to of 33421

Tim: LOL! Thanks, SI really can acquire it's own life forms sometimes.....an amazing place. <g> Tom

To: Logain Ablar who wrote (5003)	11/16/2001 10:26:08 AM
From: John Pitera	Read Replies (2) \| Respond to of 33421

Hi Tim, I was musing with Patrick about convertible notes and bonds on the other thread and I thought I'd post this here as well, since this thread gets a different set of eyeballs. I'm also trying to solicit anyone's input on convertibles, and a few of these ideas. The past year and a half, the big money to be made in convertible bonds and notes is to buy the convertible issue of a tech stock, and then short the common stock. You're protected on the upside, even if the stock goes to the moon, and you can clean up as the common stock goes down. The convertible can also obviously start going down, since there are credit, cash flow and debt servicing issues, but the common stock normally erodes much more quickly and experiences a great percentage decline. Plus your getting your coupon yield payments and so you're picking that up. If the common stock goes down 70% and the convert goes down 15-20% that's still a nice return. stocks like AMZN were great examples. But those great plays are mostly over..... the better approach is to be looking for converts to buy. An interesting twist is to be long the convertible and write at the money or slightly out of the money covered calls, then look at it as a yield Play.... coupon yield + covered call premiums. when the VIX is high you could probably create a synthetic return vehicle that yields 17.5 to 20% a year. Obviously you are not going to hit any home runs with this approach, but just look at that Ball player in seattle with his 242 hits this year -g- You've got to have an account with a fair bit of capital, because most brokerage firms are going to use the naked call option writing margin requirements, which are much higher than writing covered calls. Even though, I don't think it's a naked call position if you can offset an increase in the common stock by converting the bond at a specific price that you already know. John