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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Nancy who wrote (15816)	12/21/1997 1:24:00 PM
From: Tom Trader	Read Replies (2) \| Respond to of 50167

Hi Nancy--I was reviewing one of Iqbal's postings and he suggested a trading strategy for the SOX, which can be modified to accomplish our goal of putting together a portfolio of quality stocks. This was what Iqbal wrote: >>on these low levels you need to have a very different strategy- like buying the nearer put and selling a farther strike 2 to 1- although it is highly risky but equally rewarding << As I reflected upon it, with slight modification, it can be usefully employed in relation to some of the stocks that we are looking at establishing positions. I need to do a little more home-work on this but at first glance it appears to be promising. Basically, it involves going long far month puts at a strike price that is close to where a stock is trading and then in effect doing a ratio-write by going short on two times as many nearer month puts. If the prices declined to the entry point for the initial purchase of the stock, one can then buy the stock and close out half the puts that one is naked--basically leaving one in a situation where one might be assigned the other half. If the price then declined to a point where this was likely to occur-- one would then protect oneself at that point through buying puts -- again far month--at a lower strike price. It should then be possible to repeat the cycle again -- using lower strikes--assuming that the stock declines further. One can, of course, still sell calls when a stock reaches optimal levels--as we discussed earlier. I need to think this through further and perhaps you would do the same since it appears that the idea of scaling into positions appeals to you--with appropriate protection. >>Looking at your list of stocks, note you have several in health care related areas, are you very familiar with the field ?<< Let's just say that I am not unfamiliar with the field -- though my emphasis on this sector, at this time, has less to do with that and more to do with my attraction to washed out sectors. While I don't disagree with you and others who have talked about margins under pressure and so on in the HMO arena -- the reality is that managed care is here to stay and their presence/impact will increase rather than decrease over time. I have seen similar sell-offs in the sector before and given that it is a concept with a future, one needs to recognize that it will rebound in due course. I am not saying that one should move into the arena head-long any more than one should do so with the techs--but I disagree with anyone who chooses to write-off the sector because of its current problems. UNH may have downside and one needs to be careful. >>Can you tell me something about GHV ? It looks to me a good concept on elderly care<< My history with GHV goes back a long time; over ten years ago, I was an investor in a start-up company that was acquired by GHV--and I ended up receiving GHV stock. I sold it four years ago because I needed the money -- and I was concerned about how the Clinton healthcare proposal was going to impact the company. It was a mistake --as soon as the Clinton plan was killed--not long after I sold it-- the stock took off and never looked back. At this point, GHV is in my opinion the premier company in the elder care business. Good management and sound growth strategy--not biting off more than they can chew. I don't currently have a position in this stock. >>Did some more digging on PHYC - it looks a better value than HBOC. Another quality company with outstanding management -- the challenge for PHYC is whether they can successfully integrate the acquisition without impacting short-term operations. I am not sure that it will happen without some wrinkles and that is where the downside would be. But as a long-term hold one cannot go wrong, IMO -- I own some already, from some time ago and will add to my position at the 23-24 level. The premier company in the physican practice management arena -- not really comparable with HBOC. Regards