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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (60704)	11/3/2002 6:44:11 PM
From: ig	Read Replies (1) \| Respond to of 94695

"DIA 75 puts would be a huge success if you bought tomorrow and we plunged to that lebvel in two-3 days." But the question is, which strike would be the BEST success. If DIA spiked down to 75 in 2-3 days, DIA 75 puts would not be the ones that pay off the best, at least according to my theory. I think the 80 puts would pay much better. ig

To: mishedlo who wrote (60704)	11/3/2002 6:56:42 PM
From: ig	Respond to of 94695

"They could be worthless if we chop around up here, then in the last two days plunge to that level. You get yet a third answer if we just steadliy drift down (but note they can and do suck out time premium on last days before the final plunge). Thus if one expected a close at 7500 on expiry or during expiry week, a better question would be what DEC puts to buy." Agreed. The scenario I am thinking of entails the Dow dropping very directly to 7500 over a span of 5 or 6 days. If, however, the Dow first hits 9100 -- or even 9400 -- then the target would have to be adjusted upward for the November puts, since expiry is so near. Buit I am also interested in the question in general: If one "knows" that the underlying of an index or equity will tank hard over a short period of time (a week or two), and also "knows" where the bottom of the run will be, then what is the best strike to play for max gain? I think it is somewhere near the middle of the range of the move. (This also applies to rallies/calls.) Thanks for the pertinent response. ig