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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Steve W. who wrote (10215)	11/1/1997 8:40:00 PM
From: Tito L. Nisperos Jr.	Respond to of 70976

Steve, The farther the date of expiration the lesser the time decay of the Option. I find LEAPs as a kind of "pillow" to keep some cash that comes handy when I need them; like if the stock comes down for several days and I'm almost sure that the next moves are to the upside---what I do is sell some LEAPs then buy some near term options...Short term Options do well when the stock Dips 5 to 7% then heads back to hit new highs, like we have had before Aug; but you get slowly killed when the stock go loere and stay in a lower trading range for some time. With LEAPs, it seems we can't go wrong even if we have a trading range for a while like this time---plenty of time for the stock to come back...Selling some LEAPs on the Rise and Buying back or Rolling over to longer term LEAPs on the Dips is a good one...Keeping some cash at all times is a must; one must have a program to take profits as the stock heads higher, save some cash for 7% dips, some cash when the Dips continue 10 to 20%, and the rest for Dips that continue to 25, 45, 60% and more...

To: Steve W. who wrote (10215)	11/1/1997 10:17:00 PM
From: davesd	Read Replies (1) \| Respond to of 70976

Steve, to add to Tito's strategy....here's my 2c worth.. Listed below are the JAN 99 call options Strike bid ask 20 16 3/8 17 5/8 25 13 1/2 14 1/4 30 11 11 3/4 35 9 1/8 9 7/8 40 7 1/2 8 1/8 45 6 1/4 7 50 5 1/8 5 7/8 Now depending on you outlook there are numerous scenarios....The following may not be the best combinations...you'll have to do the math to find the best return. Also, I did not include commissions. And I am assuming you will hold till expiration. You don't have to, but the following assumes you do...that way I don't have to figure out the premiums. Lets say you are an "Extreme Bull"...you think this stock is going to be much higher than current price by 1999. Then you go for the major home run...(remember you can workout alot of combinations, this is just one) Buy the $35 call ($9 7/8) and sell the $40 level put ($10 7/8)... In this situation you end up pocketing $1 right off the bat. So you've put in no money out of pocket and by Jan 1999 if the stock is above $40 you make money. For example at $70, you pocket $35 +1 with a zero investment. Downside is, if the stock is below $35 you start losing money...at $20 you lose $15, etc. So lets say you did it with 50 calls and puts...at $70 you pocket $180,000...if it goes to $20...you lose $75,000. If you are bullish and just want a home run...buy the 30 call (11 3/4) or any higher level call...this will leverage you money. So if the stock hit $70 by 1999....you pocket $28 1/4 , a 240% return while risking $11 3/4. You could buy the $20 level calls ($17 5/8), but you get less leverage (more out of pocket) at $70 your return would be $32 3/8 (184% return)...but now you are risking $17 5/8. If you were to buy a $35 level call...your out of pockek would be less and % return would be greater...etc If you want to minimize you loss yet still make a good return, consider this one....Buy the $40 call ($8 1/8) and sell the $50 level call ($5 1/8)....in this scenario....you are risking $3 out of pocket, with a maximum return of $7 (233% return) and the stock only has to go to $50 by Jan 1999. The higher stirkes you move to, ie. buy 45 and sell 55..your risk reduces and your return increases. So you minimize your loss but you also limit you profit, unlike the previous homerun scenarios where the upside is unlimited. So based on where you think the stock is going to be and how much you want to risk...there are lots of strategies that can make alot of money. I hope I didn't make any mistakes....do your own math before you try any of the scenario's above. Good luck dave