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: John Pitera who wrote (5104)	11/16/2001 1:47:56 PM
From: John Pitera	Respond to of 33421

Cramer with his monthly Pin the strike....... -g- 11/16/2001 10:46 AM EST URL: thestreet.com . Expiration woes are dogging tons of stocks. Do you think Cisco (CSCO:Nasdaq - news - commentary) can really get past $20 today? Doesn't IBM (IBM:NYSE - news - commentary) look locked at $115? And, yes, without a stronger statement from Dell (DELL:Nasdaq - news - commentary) , we can't expect Microsoft (MSFT:Nasdaq - news - commentary) to break out of the $65 pin. It's action like today's that always made me want to take long lunches on expiration days. I didn't want to get lured into playing the game of guessing which way expiration was going to go. It was too hard. And I didn't want to play the "pin the expiration at the strike" game. There was never enough juice in it. What is that game? OK, you pick a strike that you think will get pinned -- say, the Microsoft November 65 calls -- and you sell the calls naked for $1.15. Then you spend the rest of the day betting the stock is going to go down and the calls won't be exercised and you will capture that call's value lock, stock and barrel. One of the reasons it works so well is that if the stock goes to $65.25, many of the holders simply don't exercise. Then you've hit a home run. I used to do this constantly. I would do hundreds of these. If you do it with stocks you don't like, you don't care. You come in short the stock you are doing it for. It is a terrific strategy for trading firms. But for individuals, there isn't enough juice in it. I point it out, though, because when I was at Goldman Sachs I saw individuals do it over and over again, even though they had to pay a pretty hefty commission. So be aware that the game is being played. Bulls, by the way, are selling the IBM November 115 puts for $1.50 (sucker's play, in my book, and I like IBM), because all you can make is $1.50 and you could be crushed in a quick down move. Knock yourself out with these strategies. But be careful, you may end up owning or shorting much more stock than you can handle.