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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Thomas M. who wrote (26145)	2/20/1998 11:45:00 PM
From: Lazlo Pierce	Read Replies (2) \| Respond to of 132070

<<You buy SUNW for $40, sell the '00 45 LEAP for $10. If the stock is above 45 in 2 years, you make 50%. You don't lose until SUNW goes below 30.>> ********************** Well, in the Sunw example, you're actually making 37.5% over 2 years (15 points / 40) plus interest on the 10 you sold it for if you held the cash. There are better (more volatile-higher premium) stocks out there, if you like this strategy. Certainly not MO. Just for example QCOM (now @ 46 5/8), you can sell the Jan '00 60s for 10 5/8 (51.5% if called out), the 70s for 8 1/4 (67.5%), or the 80s for 6 3/8 (85.7% if called), of course there are many other things to consider, but they're out there. Also can sell some Leap Puts too so there is plenty of premium out there, and settin up a middle can be quite rewarding. Dave

To: Thomas M. who wrote (26145)	2/21/1998 10:31:00 AM
From: Knighty Tin	Read Replies (3) \| Respond to of 132070

Tom, O.K., that is kind of what I figured he was saying. There is nothing wrong with this strategy if you can get high leap prices. In fact, it is a good idea. However, you are taking more risk and have less reward potential. You can make 50% and lose 75%. So, the key here is to pick stocks you think will not go down, not to pick stocks you think will go up. Sun, Flip Morris, and Loral would rate pretty high on my list of risky issues. (BTW, I like Loral, but I can't ignore its risk. I don't like Sun or the lung cancer folks). I would look more for the stable blue chips, like GE and Pfizer, but then you will not get the high premiums. A much better strategy, IMHO, is to do a bull spread, either debit or credit (I almost always prefer credit). In the debit version of the Sun Trade, you would buy the $35 call and sell the $45 against it. The profit potential is slightly higher and the risk is much lower. In the credit version, you would sell the $45 put short and buy the $35 put, generating a cash credit and protecting your downside. You also put less cash to work, which either means you can hold money markets in case you lose, or you can leverage the position if you are really in love with the stock. MB