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

To: bob wallace who wrote (28925)	11/20/1997 9:28:00 PM
From: Autumn Henry	Respond to of 58727

Thanks for the post Bob, I thought you were hooked up to a university. Were you the past president before you retired? No, I am too trade co-dependent when I discuss trades (TDW/ESV) and spend more time agonizing about what I said a stock was going to do than clear headedly trading myself. Often same with the indices and where the market is going. I think of myself as a contextual trader first and foremost.....and there is so much I don't know....like what does a market ace condition look like? One that beats the queen....like the gaps below on the NAZ.....that is now the queen and the ace factor (making the market move in the opposite direction of closing the gaps) is what? Here is maybe some of the reason from the street. I don't understand it but get the idea of UP. Maybe if I read it a bunch of times: Wrong! Dispatches from the Front: Cramer Says Put Buyers Got Caught Off Guard By James J. Cramer 11/20/97 1:40 PM ET Those of you watching this November ramp on your screens or on CNBC right now will recall previous occasions when we saw this pattern. This rally is the revenge of the October selloff. It is the vindication of the November put sellers. Remember October? Many professionals were caught leaning the wrong way. Hedge fund managers had grown complacent in 1997 and decided that giving back 4% or 5% of their annual return by purchasing S&P puts every month simply wasn't worth it. As I said two weeks ago, in this column, the put buying had been fast and furious in November, as hedge fund managers proved eager to refight the last war. They couldn't let another big selloff happen without trying to make or salvage something from it. Now we are seeing the results of that Chicken Little handiwork. People who bought November puts are now realizing that, with two days left, these puts are going out worthless, so why not jettison them or get something out of them. Let's take the bears on Coke -- of which I am not one. It is possible, in a fit of worry, that hedge fund managers loaded up on Coke puts, both of the November 60 and 65 (10,000 and 3,000 open interest as of this writing), betting that Coke would have to fall. (I could have picked any stock, but Coke puts trade like water so nobody can accuse me of moving them with this intraday blast.) Coke is a great proxy for the market, so why not short it; it won't get a bid and the estate of the late chairman probably has to sell stock anyway. But with one day to go before expiration, your Coke puts are looking bad. Not only is the 30-year bond trading with a yield around 6% -- pushing investors into a defensive rotation -- but Fidelity says it's set to make a distribution for its Magellan fund. What does that mean? The biggest mutual fund in the land is done with its selling. So the put buyers are starting to think all that feel-good insurance is looking pretty much worthless. This loss/opportunity is the stock equivalent of being able to take a Lexus out for a reckless ride, knowing that for the next 24 hours you can smash it up with impunity. So, you can sell the puts and take the loss. Or you can just take lots and lots of common for a free shot to the upside on Coke. Anything above 65 is free against the 65s, and any rally at all salvages some money from the out-of-the-monies. Do people really think like this? I have traded puts, sold puts, bought puts, set up baskets and sold baskets. I have probably bought and sold more puts than anybody else alive. That's why you should believe me when I say: You bet they do. Which is why this rally is so powerful and won't stop today.