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

To: Jacob Snyder who wrote (13509)	12/17/1997 12:44:00 PM
From: Tech Buyer	Respond to of 70976

Jacob, To be rigorous, one should assign probabilities to the possible outcomes you've mentioned, along with others (margin call, selling at different times before expiration, other percentage gains in the stock, ...) I agree that holding until near expiration is not a good idea because the LEAPS would become short-term options, and we lose the time premium we've paid for. Personally, I use LEAPS only for short-term (< 1 year) trading. They provide some leverage while giving a safety buffer. I've also used margin on occasions for short-term opportunities (i.e., oversold good stocks), but don't feel comfortable with it for long-term holdings. TB P.S., Dumped the recent 10 LPJAD today @ 16 for a gain of $2065 (14.85%) after commissions (before tax) in 3 trading days. The equivalent gain using straight stock would be around 11%. Wish the spread on LEAPS isn't so wide!

To: Jacob Snyder who wrote (13509)	12/17/1997 1:01:00 PM
From: Tito L. Nisperos Jr.	Respond to of 70976

Jacob, if you believe the stock is going to double in 2 years then LEAPs for 2 years is a good strategy; if you think the stock will just trade a narrow range of 10 dollars in 2 years, then it would be better to trade it short-term or just confine yourself to stocks---time premiums deteriorate over time, you know...If you buy LEAPs, just buy say 5 to 10% of you over-all portfolio to try it...

To: Jacob Snyder who wrote (13509)	12/17/1997 2:21:00 PM
From: Paul V.	Read Replies (2) \| Respond to of 70976

Jacob, >I've never bought options, I'm just thinking and doing numbers. I'm trying to find a least-long-term-risk, greatest-long-term-reward strategy. Could some of the more experienced people tell me, are these numbers accurate? Are these assumptions realistic?< I have done exactly what you have suggested--buying on margin. But, we have to factor in interest due, which according to my CPA is deductible, and possible downside of a margin call either created by a pullback in amat prices or an increase in the call percent, i.e. 30% increase to 40 or even 50%. My margin purchase was at $16.05 so I have sufficient protection. IMHO, the upside risk far exceeds the downside risk. As Tito's leaps what are the additional costs and are they deductible on ones taxes? As I indicated in another post--stay away from a margin call!!!! Just my opinion. Paul V.