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

To: donald sew who wrote (35075)	2/16/1998 11:16:00 AM
From: Patrick Slevin	Respond to of 58727

Your "In-The-Money-Overlapping-Strangle", or for the sake of brevity a ITMOS. (and hilarity, if we start using the term and 300 posts from now a newcomer asks just what the hell we are talking about.) Is a nice hedge, I thought about it myself during that massive 2 day selloff last October. I was already in puts from the prior week and had no idea where to take profits. But at first blush it looks to me like all you have really done is hedge a short position. I suppose if you had to put a name on it it might be called a Reverse Strangle. But in theory you have no where to go with this. Your main position is the short and you don't want to close it out so you've just hedged it. If the market stops, or stays between 8100 and 8300 then you've locked in the profit less option premium. Obviously what you wish to have happen is to have the move accelerate to the downside and then be left with possibly repeating your hedge at 7900, for example. Or on the other hand have the market sail to 8500 and then hedge your call. So what you really are looking for is further market movement, but all you will be doing is buying more options to hedge existing ones. Perhaps something that would be ill-advised, though certainly very tempting.

To: donald sew who wrote (35075)	2/16/1998 11:30:00 AM
From: Patrick Slevin	Read Replies (3) \| Respond to of 58727

ITMOS Another train of thought; if you want to start getting funky with this, Evidentlly you are concerned that you will see a reversal to the upside and yet you are not certain that business on the downside is over with. How about buying those calls, then finding a resistance point for the bounce and writing puts against half your existing "long" put position. Now if you get your bounce you can cover the "short" put position for a profit and if the market does not bounce you are still riding out half the puts with a locked in profit on the other half. DISCLAIMER My mom always wanted me to be a rocket scientist.