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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (7754)	12/3/1997 5:11:00 PM
From: space cadet	Read Replies (2) \| Respond to of 9285

Pancho, good points all around. I am basically in complete agreement with you. Unfortunately I am using hi-risk options because I am undercapitalized. I was reasonably capitalized this summer but then I had a dreadful losing streak and lost a substantial chunk of my money. (Yes I lost them in options. Hopefully I won't make that mistake again). In short, I'm only using options till I get (back) a reasonable sum and then I plan on being a lot more conservative. Actually I don't think long term (6 month or longer) options are that risky as 6 months is a long time in the fast moving hi-tech scene. But unfortunately some of my puts are expiring this month and next. I should never placed myself in this position but I did and so I probably can kiss my ctxs puts goodbye. Incidentally, while buying options is definitely risky, do you ever sell covered calls on your positions (or covered puts on your shorts)? I think actually that this is the best of both worlds and plan on doing this a lot more, once I get through this risky period. >I must say that people at SI seem to use options too much [and also trade too much]< Truer words have not been said..

To: Pancho Villa who wrote (7754)	12/3/1997 5:12:00 PM
From: vegetarian	Read Replies (2) \| Respond to of 9285

>>With all due respect to people who use options activelly, I must say that people at SI seem to use options too much [and also trade too much]. IMO, options are expensive lottery tickets and should be used only in rare ocassions, if at all.<< In general I agree that options, if used for leveraging profits can be quite risky, however they are a good idea in certain situations. These situations are when you predict that a stock will move but -it is in a price range that a takeover is possible, you are better off with puts than a short -the float is small and there are no shares to short (it is risky in this case) or you are concerned that the shares may be called back -you are speculating a takeover but company's fundamentals are not great or suspecting an earnings warning (calls better than a buy here) because you see too much call activity on the stock I am sure there are other circumstances which more experienced folks can point out but if options can be justified INSTEAD of a buy/sell and not leveraging it, it may not be such a bad idea.

To: Pancho Villa who wrote (7754)	12/3/1997 5:24:00 PM
From: CalculatedRisk	Read Replies (3) \| Respond to of 9285

Pancho, RE: Options. I agree. The best advice on options I ever received was: NEVER PLAY OPTIONS! (There is a reason people say "play" options and "invest" in stocks) If I had followed this advice over the years, I would be further ahead. Options are dangerous for two reasons: First, there is the time risk. IMO, eliminating (or minimizing) timing is one of the keys to successful investing. Second, is the gambling syndrome. There is a tendency to play options, just to get some action going. Very dangerous! Earlier, I suggested a "synthetic short" position using options IF AND ONLY IF there are no shares available to short (like AMZN). I have used this strategy once - successfully - but it was only acceptable because the Company was a screaming short AND there were no shares available. May I take my own advice, Regards, Bill

To: Pancho Villa who wrote (7754)	12/4/1997 1:01:00 AM
From: CatLady	Respond to of 9285

"I must say that people at SI seem to ... trade too much" Guilty as charged, sir! In my defense, I confine that activity to an internet brokerage account set up to find out if I could "trade" any better than my long term "buy & hold" strategy. The internet accounts ( 2 actually ) are about 15% of my total investments. If I prove to myself that I can trade profitably, the percentage will be increased. If not, I'll stop when I've paid enough "tuition" for my trading lessons. Some of the stocks I talk about, like Dell, Rambus and Cisco, are in my long term account. Cisco for about 4 years, sold off 4/5ths in August. SPBC, which I bought at the IPO 10 years ago, (worked there at the time) 10x increase in 10 years, sold off maybe 3/4 of the original over the years. I now make myself drive over to the broker's office to make changes in that account, in order to avoid impulsive decisions. I do not expect "buy & hold" to work as well over the next 10 years as it has over the last 10. Thanks for reading, CL

To: Pancho Villa who wrote (7754)	12/4/1997 2:09:00 AM
From: hasbeen101	Read Replies (2) \| Respond to of 9285

With all due respect to people who use options activelly, I must say that people at SI seem to use options too much [and also trade too much]. IMO, options are expensive lottery tickets and should be used only in rare ocassions, if at all. FWIW Pancho I tend to agree with you. Because options have a finite (and short) lifetime, the transaction costs are relatively high. It's really critical with options to ensure you have low brokerage costs. But you still have to cross the bid/ask spread at least halfway (on average), and that costs dollars. As you say, markets are fairly efficient. You're doing realy well when you can buy or sell mispriced stocks. Trying to profit from mispricing through options is even harder. One of my clients is a funds manager where there was a change of management a few years ago. The old management were truly dreadful. And they traded options a lot. Many successful equities managers trade options rarely if ever.