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Non-Tech : Any info about Iomega (IOM)? -- Ignore unavailable to you. Want to Upgrade?

To: isdsms who wrote (38658)	12/6/1997 7:27:00 AM
From: KM	Read Replies (1) \| Respond to of 58324

Ira: He's talking about spreads, say where you buy IOM Feb. 25's and simultaneously sell a like amount of IOM 35's, thereby reducing your cost and ensuring you will make some money no matter which way the stock goes. Personally, I don't like bull spreads much. I like to buy in the money options as proxy for the common stock and just ride with them. I will do bear spreads from time to time though.

To: isdsms who wrote (38658)	12/6/1997 3:45:00 PM
From: Ken Pomaranski	Read Replies (4) \| Respond to of 58324

Call techniques: When I buy calls, I always buy fairly deep in the money, so that the time value is very small. Example: last month when IOM was 28, The following calls were available: FEB25: 5 3/4 ---> break even point = 30 3/4 at exp. FEB30: 3 1/4 ---> break even point = 33 1/4 at exp. FEB35: 1 3/4 ---> break even point = 36 3/4 at exp. I also like to buy out 2/3 months, so that if the stock price drops, the call will depreciate at a much slower rate as it gains time value as the stock falls toward the strike. (negative delta is small). When the stock hit 33, the following prices were available: FEB25: 9 FEB30: 5 FEB35: 3 1/2 (note how the 25 performed better than the 30... not important for this discussion.) At this point, I sold short the FEB35, and pocketed 3 1/2 points! My new position is now: LONG FEB25 @ 5 3/4 debit & SHORT FEB35 @ 3 1/2 credit. total position is: 2 1/4 debit. Now, I'm in great shape! My break even point is 27 1/4. I MAKE MONEY if Iomega closes above this in FEB. My max profit is 10 points, max loss is 2 1/4 points (my combined debit, if Iomega closes below 25). Note how low risk this position is. I make a pile of money even if Iomega closes relatively unchanged, whereas the out of money call buyer will lose his/her shirt unless the stock moves up significantly. Profit table (at 20 calls:) 25: -$4500 27 1/2: +$500 30: +$5500 32 1/2: +$10500 35+: +$15500 Now, as Iomega moves between 33 & 30, I can keep buying back the calls I sold short, and selling them at a higher price, continuously generating credits so that I will eventually have my position for free! If Iomega continues to go up, who cares! I'll take my 4x gain in FEB. Good luck! kp