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Strategies & Market Trends : Option Trades -- Ignore unavailable to you. Want to Upgrade?

To: flickerful who wrote (514)	1/21/1998 12:19:00 PM
From: scotty	Respond to of 2341

Randy,go to Yahoo home page,click on Business and Economy,click on current business headlines,type in "options focus"in search news.

To: flickerful who wrote (514)	1/21/1998 4:06:00 PM
From: SteveG	Read Replies (2) \| Respond to of 2341

<A> Generic DJ options article (still in IDTI, flickerful?): Options Report: Strategies For Earnings Speculation By Steven M. Sears NEW YORK (Dow Jones)--Traders who buy options to speculate on earnings reports are invariably the smartest, or the dumbest, people in the market. The emotionalism at the chance to score big and score quick can override reason and turn a normally rationale investor into an wild-eyed gambler. As options strategist Larry McMillan said last week, traders who speculate on earnings are likely to be wrong 50% of the time. But there are options strategies for profiting on a trade even if you're unsure of the premise. All involve using both calls and puts. If you think you couldn't be lured into speculating on earnings, consider the experience many investors are having right now with International Business Machines, which traded like a thoroughbred Tuesday continuing a five-day run. The stock rallied and the options sizzled Tuesday as traders talked about IBM's earnings' meeting or beating the consensus estimate of $2.15 a share in the fourth quarter. The stock seemed poised to go even higher come Wednesday's session, while the options had the potential to deliver the kind-of whopping, one-day returns that are rarely seen in the stock market. After the market closed Tuesday, IBM reported basic per-share earnings that exceeded analysts' expectations. But IBM also said its current first quarter will fall short of the year-ago results. The stock is off 8 at 100 3/8 and the value of the call options held by earnings speculators have fallen by more than 63%. While earnings indicate primarily what a company has done, it's the future much more than the past that is of paramount concern to traders and investors. The mentality of the glass always being half empty knocked the wind out of many speculators, which serves to illustrate just how risky the earnings game can be. Not everybody lost on IBM. Before the announcement, some people sold the February 105 and 110 calls that everyone else was buying to speculate on earnings. And the floor traders who were said to have bought the calls hedged their positions with put options, which provided downside protection. This cool-headed approach to money and the markets is an example of the sort of multi-dimensional thinking that is needed to succeed in the options market, particularly when the urge compels traders to speculate on earnings. "By definition, they are more disciplined than speculators. Rather than looking for a windfall profit, they're looking to minimize their losses by taking the other side of the postion just in case the buyers are wrong," said Michael Schwartz, CIBC Oppenheimer's chief options strategist. The standard sign of speculation on corporate earnings reports is a noticeable increase in activity in options that are one strike increment in- or out-of-the money. Strike refers to the price that the option holder may buy or sell the underlying stock. Often, "dumb" money, typically retail investors, rush into the market in the days leading up to the report. That's often a bad sign as "smart" money, typically institutional firms, which usually have the purest information, have likely been snugly positioned for weeks. Dumb money often winds up trading on the wishes and hopes of perceptions and happenstance.