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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: FR1 who wrote (4743)	11/11/2001 8:20:52 PM
From: Timetobuy	Respond to of 99280

The first set is correct. Remember the stock was at 18. That represents a $5 call when the stock was around $20 appreciating to a stock of $40. $5 premium on a deep itm call is pretty steep, actually. I used that price to add some time in. The reason I didn't buy calls but instead bought stock was for the very reason you brought up. That is what if the company were to warn? I was prepared to buy more at $15 and even more if it had hit 10. I sold the shares because I didn't think we were going to go up a good deal more and a 50% rise in a stock is a nice profit to hold onto. I gave that example as what would have worked nicely, since you asked how I could exercise stock by selling part of the calls. However, I wouldn't have been so lucky on that particular trade because I would have sold out instead of exercising. However, now I'm more comfortable with the economy improving. With the stimulus we're getting I'm more comfortable with buying calls to exercise, ON DIPS. I haven't felt this way since the fall of 1999. Commissions don't matter that much if the stock were to appreciate a good deal as far as call premiums go on a stock that is at a decent share price, even with smaller lots, but I only trade in blocks of 10 since the commissions are virtually the same as for smaller lots. But trying to do this with a stock like amcc is kind of silly. It's more worthwhile to buy the shares at a price level near 10 than mess with options. Options always represent more risk than stocks, but that risk can be narrowed (but not eliminated) by not buying on margin, buying deep itm with time on pull backs and at valuations that are reasonable. I only use this method with stocks I'm very comfortable with. Brcm should be fine in the low 30's should it pull back to there on low volume, given the cushion of 3 months time. The second example I gave is what I plan on doing with brcm should it fall again and not be company specific. Notice it's not got the outcome of the first trade since I don't feel it's going to go that low again, but should it get there, I'll probably double the position that I bought in the low 30s and then probably sell the original calls when it recovers again, which it should do by February.