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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: Jeffrey S. Lillie who wrote (21032)	12/20/2002 5:34:07 PM
From: mishedlo	Respond to of 30712

Jeff. Let me know what you decide. Let me give you a QQQ real example from last year (no - I did not do it). I am guessing that 10 point ITM leap puts last January (assume an entry point when QQQ was at 40) would have cost about $12. In other words Strike 50's. Just holding the things to the bottom at 20 or so thay would have been worth $30. One damn trade. Even if you missed the bottom and got out at say 24 they would have been a clear double. Now if you hedged that with calls for the max pain rallies (or exited the leaps on the rally signal) you could have done far far better. The trick seems to be buy juust deep enough ITM so that there is very little premium. The SPX 2003 Dec 1100 for 222 gives you a full year with only about $18 in time premium. How bad is that? (1100-222=878) 896-878=$18. $18 in premium for an entire year is not a bad deal. Try that with current month barely ITM puts that gap up 15 points against you one day and you will see what I mean. If you ride it out you can lose it all even if those 15 points come back (if they come back too late). With 12 months, loss of a month time premium is irrelevant for at least 6 months (assuming you stay at or near the + column). In theory you are putting more $ at risk, but in practice you are not. You are however tieing up more $. But unless you are fully in all the time, that should not be a problem. The DEC 104 DJX leap put seems the best to me in the same regard. Cost about 23.60 If your target next year is 6500 and it hits, they should be worth $39. I am strongly considering a move to 50% cash, 25% leap puts, 25% gold stocks with the attempt to just hold the damn things (unless I perceived a major bottom). The other 50% I would trade. The leverage on the leap puts is approx 200% I would speculate so 25% leap puts would make one 50% short without tieing up all ones capital. Thoughts appreciated. M