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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (180750)	4/13/2005 10:42:01 AM
From: Elmer Phud	Read Replies (1) \| Respond to of 186894

GV Why buy the LEAP instead of the stock? Because you limit your exposure. You can't lose any more than the cost of the leap. BTW - I just spoke with Schwab and they now allow long option positions in IRAs, in case anyone's interested.

To: GVTucker who wrote (180750)	4/13/2005 3:50:03 PM
From: Amy J	Read Replies (1) \| Respond to of 186894

GV, RE: "Why buy the LEAP instead of the stock?" One of the best trades I made last year, was buying a leap to enable a protective hedge against large stock gains. Here's what I did: In one of my trading accounts, I accumulated Csco when it was around $9 thru $11, 11 thru $15, $18, etc. during the downturn. Then it had a sudden run up but when it reached $28 I started getting a bit nervous with losing these gains (yes, the bust did teach me something.) But I also didn't want to totally be out of CSCO in this particular trading account (the boom also taught me that too). So, leaps provided a happy compromise that allowed me to protect my gains in a comfortable way. Here's what I did: I sold all the CSCO in this particular trading account around $28 and pocketed the large gain. What a sigh of relief that was! Meanwhile, I bought a few leaps to partake in any further upside should their continue to be one and since the leaps didn't cost much who cares if you lose them, it was a no brainer to pocket these large gains after such a sudden run up. You probably can guess the rest of the story - CSCO dropped by about 30% since then. So, thank goodness I captured those gains when I did. Never underestimate the power of buying leaps as a means to free yourself to capture stock gains as a protective hedge against any downside. I turned around and took those gains and plowed it right back into Csco as it dropped 30% (which I've been doing since last year). I really should have employed this type of hedging strategy with Intc during the great year 2000 bubble. It would have saved me a fortune. On a different note, regarding variations, take a closer look at VNLAE around I believe the July time frame or so and analyze those. The sentiment was overly positive back then because the stock had just momentarily increased and was higher so the sentiment was positive, after which Intc remained flat thru today. You'll loosely note too much positive sentiment in the call prices back then, loosely a 15% sentiment. Don't focus on this next part, but generally, if > 1 year, #months aged/leap duration / 2 = time erosion% = decay %. Leaving loosely 15% sentiment between then and now, once you back out the decay % as defined above. This positive / negative sentiment delta makes sense, when you consider Intc is generally more positive in sentiment entering the holiday consumer spending season, than it is now after the holiday season has ended. (Do not confuse sentiment with erosion decay %.) I'll be out for a week or so. Regards, Amy J