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

To: Tom Trader who wrote (31312)	12/16/1997 5:10:00 PM
From: Jenna	Respond to of 58727

Tom, first of all the approach more or less metamorphosized during the last 6 months.. Since the earnings season in April 1997 to be exact. I've been getting on average about 1.75-2% a day..it has gone down rather than up from over 2. It's an underestimate rather than an over estimate.. It has been on a 100k+ portfolio with margin up to 25%. <Do you establish positions using options or do you buy the stock?> I could write a book just answering this last question.. Before the 'carnage' as you so aptly refer to it, I was buying about 75% options and 25% stock.. The returns were extremely good (during APRIL-AUGUST).. Earnings Plays are hand-tailored for options because the stock is bound to move that day (either up or down) it won't lag and you can get at-the-money or deep in the money options and, finally, you can easily get 60%+ gain for one-day play. What was even more fantastic was the fact that if the company beat the street estimate, the stock was good for multiple day runs (i.e. ORBKF, QCOM, JBIL, SMOD, SEBL, TJX, BKE).. But there is always a catch to something so good: <Finally, did the recent down-turn take its toll on your portfolio in any marked way or were you able to avoid the carnage for the most part??>> Unfortunately, and this is good for everyone to learn I DID NOT avoid the carnage, rather the opposite. If you recall the carnage was end of October, just on the exact days a big portion of companies were all reporting earnings (October 22-26). What I did, and what cost me a lot, was setting up 4-5 option positions for the entire week. In essence, I purchased 20-22 postions for the approximate cost of 50k... They were good positions, well researched in good companies that ironically ended up beating the street. I did not foresee, however, any external factor that might annihilate, for the most part, these positions. My long term portfolio was damaged, but only to a small extent... My trading portfolio was reduced by almost 33% in 2 days. I was able to rescue about 15% of my options. Luckily, I've actually used those same earnings plays AFTER the carnage to recoup a good portion of that money.. but with one important change. I will never again hold more than 5 option positions at one time.. I will change my strategy to 75% stock and 25% options. Of course that means less returns but it is safer.. I've transferred some money into my trading portfolio and have since been trading rather nicely in conservative issues like the ones I posted. But of course, I've been daytrading the techs these last 2 days just as all of you. I do a lot of daytrading now instead of position trading (taking home for 2-3 nights) and I am very comfortable daytrading options in oil and in the large cap tech sector. For companies under $15 a share, I trade the stock.....If it's over 15 and I buy a call, I like a call volume of at least 30. To date, I've improved my 'money management' skills. My profits are not as high, but I have the security of knowing a stock is still an asset whereas an option is not. I'm into about 30-50% cash every night and I'm not unduly worried about any surprises. <I have been trying to figure out how best to use your information for trading. > Well it's kind of hard to follow because you don't do earnings plays, but on my Nasdaq Gems thread exchange2000.com they seem to follow these rather well without even calling them earnings plays.. I post my picks daily: a) Those that come up on my screen from T.A. for momentum plays b) Earnings Plays.. I separate the two. (Today, for example, I played AGE as an earnings play and yet I played DMIC, and TKLC as a purely technical play) and finally: c)Sector plays such as CDG,EVI and DO So, in essence, I didn't escape the carnage, but I've changed my trading habits so that 'money management' has at least the same weight as profit making.