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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: dvdw© who wrote (15253)	12/2/2002 10:41:15 PM
From: James F. Hopkins	Respond to of 19219

Thanx; Well I've played the stock market long enough taht I guess I should have a little insight, and I've made my share of bad calls too. However after all these years I've come to understand some things taht I know I can't explain . ( why no one can call the market beyond a certain point , if we go out very far it's just a guess ) I know why that is, but for the love of me explaining it is beyond me. Short term calls are not to hard, but no one is going to get them right every time either. ( longer term I don't even try any more ) Longer term There are just to many variables , and the variables can and often do change. -------------------- I play a few like longer term ( on the guess ) but I also hedge them. I'm not sure I can explain my type of hedging in a way that some super bull won't find fault with it. I'll give it a little try; and try to keep it simple ( which it really isn't ) 1 A person is subject to put just so much money in the market, some more than others but each person has his limit. To keep it simple lets say the limit you have to give the market is 10K you see a stock you really want , I'll just use one stock but know in reality taht would not be wise. OK here is XXX trading at 5, and you want it ...if guy 1 buys it at 5 he can buy 2000 shares , now it has 7.5 calls selling for 2.5 ( and if you sell the calls you get it at 2.5 ) but can get called at 7.5 however keep in mind ( you can now buy 4000 shares ) with the same money. ( almost like having margin but no interest and at least you don't need to worry about a margin call. ) OK Guy one has 2000 at 5 , guy 2 has 4000 at 2.5 ( but can get called at 7.5 ) at 7.5 guy 2 will make $5 a share on 4000 shares or $20000..if the stock only goes up 50% Meanwhile for guy 1 to make $20000 his $5 stock has to go to $15 or up 200% For the love of me I don't understand why people can't see this. Well that's over simple but has the basic idea. The hedger if he looks around can buy more shares with the money he has to spend, often twice as many. He can get more diversity because he can afford more diversity than the non hedger , and he has limited his down side risk, especially if he spread the extra money he got from his sold calls. If he's careful he will make as much on a 50% move up as the non hedger will make on a 200% move up. ( both having the same amount of cash to invest ) ------------------ Now I don't always sell covered calls, sometimes I do a fast flip..but the ones I flipped on this run up are gone.. I used that cash to roll up some of my CCs just like a person would do a BULL option spread. Buy the deep one and sell closer to the money, this captures the ( spread ) I keep some cash , because at some point if the market starts down I may wish to lock off some stuff with a few puts. ---------------------- Well that's an understatement on my part, due to my age ( 66) I hold a lot of bonds , which can be looked at as cash. I've also been buying up some distressed local property for pennies on the dollar. Jim