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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Sundar Rajan who wrote (27512)	10/30/1997 6:19:00 PM
From: Tom Trader	Read Replies (3) \| Respond to of 58727

Sundar and others who sold puts or are contemplating selling puts Please understand exactly what it is that you are getting yourselves into. Before you enter the trade decide what it is that you are trying to do---are you willing to own the stock at the strike price that you are selling the put. If not, you are SPECULATING--and there is nothing wrong with that provided you can afford to do so, you are able to absorb the losses and you are temperamentally suited to that sort of trading. But when you speculate -- you must be willing to close out the position at loss if it goes against you--so you need to know at what point you stop yourself out before you enter the trade and THEN STICK WITH THE PLAN. Sundar, I fear that is where you went wrong with your TXN trade--if it was a speculative trade you should have closed out your position and taken a loss, when the stock begaan to break-down. I am looking to establish these synthetic long positions where I will sell puts on different stocks and buy calls with the ABSOLUTE understanding that I am willing to own the stocks and have the funds to own them--so I am willing to ride with them. Besides, I am long index puts that I bought yesterday to protect me if the market tanks and then I end up having a lot of positions in the puts on stocks that I sold which would lose money, in a pronounced down-trend. >>Everything I've touched recently have turned out be disastrous - bought CPQ Jan 70, GE Jan 65 and BAC Jan 70 calls yesterday and look where they are today!<< Sundar, one of the axioms in trading is to trade with the trend--and no matter what any one says, IMO the trend for now is down. So speculating on the long side, except if you are a very nimble trader will almost certainly lose you money. Now the trend could change next week, for all that I know--and if it does, then one should trade on the long side. Electric, the reason that I am looking to sell puts all the way to January 1999 is that I don't want the stock assigned to me--but if it is I am willing to own it. By going out to January 1999, it gives me 14 months to close out the puts, in due course. The funds that I have as margin for the puts that I sell are in a T-Bill with my broker, earning interest. I want to have the benefit of the upside in having positions in the stocks thru the calls that I buy without having my funds tied up in them. So everyone--it is important that you really understand what it is that you are committing to before you start selling naked options. Fortunately, most brokers will not allow one to do so without adequate equity and experience. Have a good evening