Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Greg Higgins who wrote (3)	1/28/1998 1:16:00 AM
From: R. Gordon	Respond to of 355

Greg, I don't use this strategy as a primary income sourse - it just seems like a good way to enter a position with a slight advantage on my side. I found buying opportunities in ALL and LUV - but they don't last long. I go for positions that are one or two months out. Only when there is a tremendous bullish sentiment for a stock does this occur so it tends to place me at a good market price. If I can get a 5% or 7% headstart I feel lucky. If I get called - at least I make a profit. If I can buy back the calls, there may be a chance I can sell them again. I try to buy back the stock at 20% or less of what I paid for it and if the TA looks decent, I am usually willing to take the risk that it will fall further and eat some or much of my profit. Sometimes, if I feel daring, I will sell some of my protective puts - maybe 25% of them. However on expiration day I will often buy back the calls and probably sell the next month out - or wait a week to do so. Hopefully I can find a time during the month to load up on protective puts and calls for the upcoming month. While I have given up trying to predict the daily movement of the stock - I can often tell if a stock is pretty high or pretty low. My great trades are a little more frequent than my poor ones, and the system seems to be working overall. That Jan 99 CPQ looks attractive - I haven't thought much about doing this with leaps. When I buy protective puts or calls, I try to buy them cheap and will often sell them for a net gain in my position of 5 or 8%. I've been concerned that leaps are buffered by so much time - I don't have a good sense of their movement with price changes. One more thing, I like the pattern of movement of ALL and LUV overall. They seem like solid companies that are not going to do a VVUS, SIII or IOM. Richard

To: Greg Higgins who wrote (3)	1/28/1998 9:30:00 AM
From: William G. Murray	Read Replies (1) \| Respond to of 355

Greg wrote: "I ran the put thru a put-call parity analysis" I would be very interested in your method of calculation. As a follower of McMillian, I use several spreadsheets built around information gleened from "Options as a Strategic Investment". For option valuation I currently use the "Optionscope" program supplied with the Equis "MetaStock". Are these tools considered adequate. If not, can you recommend something that is adequate. My trading includes covered call strategies; however, my experience with the higher level strategies (calendar spreads, diagonals, etc) has been limited to paper trading. I look forward to discussions that will allow me to develope a comfort level beyond my current trading routine. B.M.

To: Greg Higgins who wrote (3)	1/28/1998 9:15:00 PM
From: R. Gordon	Read Replies (1) \| Respond to of 355

Greg, >>>The CPQ Jan 99 30 Leaps with the stock at 30, show Call bid 6 1/4, Put bid 4 7/8. This is a net profit of 1 3/8 on a cash investment of $15 for a risk free return of 9% before commissions and margin interest<<< Check it out. This 9% risk free return has now been cut in half by a 1/4 point drop in the stock. Like I said, these deals do not hang around long. The jan99 30 call is now listed at 5 5/8 and 6, the ask for the put is now listed at 5 and 5 1/8. I don't know why there are two sets of numbers. It has changed from $1.375 to $.65 . Richard