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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: StanX Long who wrote (65158)	7/27/2002 7:37:02 PM
From: advocatedevil	Read Replies (1) \| Respond to of 70976

Stan my friend, frankly, your analysis of the AMAT options scenario concerned me enough to offer some brief clarification and commentary: 1) The Jan 04 $10 Calls closed Friday with a bid/ask of $6.50/$6.80, significantly above the $4 price you referenced. 2) So, let's say ya bought those 50 contracts for $6.65, that would cost ya $33,250. 3) Thus, a Jan 04 AMAT closing price of $20 would net ya about a 50% return (your $33K play would then be worth $50K). 4) If you had instead bought the stock outright at $14.32, you could have purchased 2,322 shares with that same $33,250. 5) Thus, a Jan 04 AMAT closing price of $20 would net ya a about a 40% return (your $33K play would then be worth $46K) 6) On the flip side, a Jan 04 AMAT closing price of $10 would lose ya 100% of your leap play compared to 30% of your stock play. Hmmmm... pretty risky IMO. Stan, It's my personal belief that options can add a little spice to a position, but should be used sparingly. Ya gotta keep in mind you can lose the whole enchilada buyin' dem leaps. Playin' with a few speculative contracts can be fun, but I don't consider them investments. I urge you to please be careful here and consider downsizing your potential position... all FWIW and since ya asked. Good luck with however ya play it! AdvocateDevil

To: StanX Long who wrote (65158)	7/27/2002 11:41:39 PM
From: Tito L. Nisperos Jr.	Read Replies (2) \| Respond to of 70976

Stan, your computations seem okay but not the price of the Calls. According to this site, the In the Money Call Jan '04 10 closing price/share Friday were at $6.60 Bid and $7.30 Ask: —- host.wallstreetcity.com Could it be that what you meant was the Out the Money Call Jan '04 15 which closed at $4.00 Bid and $4.50 Ask? Your $4.00/sh buy price seems to belong here. Let's assume that when AMAT closed @ $14.32 Friday, you bought 50 Calls Jan '04 15 @ 4/sh. Your cost = $20,000 (50 X 100 X 4.00). Assuming further that a few weeks from today AMAT reaches $20/sh and said Option reaches the price of $6.50/sh (20 – 15 = 5 + Time Premium left) —- then you decide to sell pocketing $32,000. Your gain therefore would be $12,000 (32,000 – 20,000) or 60%. For comparison, if you bought 1,396 shares of the stock spending about $20,000 instead, then your gain would be $7,920 (27,920 – 20,000) or 40%. Now, if you bought 50 Calls '04 Jan 10 @ $7.30/sh Ask at the cost of $36,500 (50 X 100 X 7.30) —- then you would gain $13,500 (50,000 sale price – 36,500 cost basis) or 37%. Could be more when the Time Premium left is considered. I hope my computations are right. As you can see, the Call Options don't have much advantage over the stocks when we are calculating a price advance of just 6 dollars or so. There's a lot of difference when we talk about AMAT returning to 25 or more. You could play with the values (what if) in a Spreadsheet. Will AMAT ever go back to 25 again? Based on past actions as measured by FA, TA and even my YoYo-StairCase Analysis —- Yes. But things are not normal. Our Analyses, our Graphs are not working. Even the Doom and Gloomers before who changed their stance and became Bullish recently can't believe how things deteriorated. Well, that's what they've wished for and they got it so they have to suffer also with it.

To: StanX Long who wrote (65158)	7/28/2002 12:26:35 AM
From: Gottfried	Read Replies (2) \| Respond to of 70976

Stan, it's too risky now. Wait for the bull market and play call options with small amounts. And don't wait till close to expiration of the leaps. Consider the AMAT Jan '04 $15s at $4.00 finance.yahoo.com Most of that $4.00 is time value and that will be gone by the end of next year. Then AMAT price has to be $19.00 or so just to break even and $23.00 for a double. Take profit much sooner, after only a little time value has been lost and the stock trades at 16 or 17. You could even try this now, instead of waiting for the bull, but with a very small position only and getting out with gain of a buck or two. That would help you get the feel of it. You can trade just one contract and interactivebrokers.com charges only $1. Gottfried