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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: steve goldman who wrote (2630)	2/27/1998 9:21:00 AM
From: Steven Bowen	Read Replies (2) \| Respond to of 4969

<In my opinion, going long out of the money calls is a suckers bet. Its like playing roulette. You win once and they put a big pile of chips in front of you, only to give it back 1/4s at a time.> I don't agree. If you play carefull with a plan and do your homework, I can make money buying calls nearly 100% of the time. Just don't think you can pay an 1/8 and look to sell for 15. Know your stock, know it's trading pattern, know it's support and resistance, know it's important dates. And probably most important, play a stock in a well defined trend (hopefully up if you want to buy calls) or pattern. And then time you entries according to support and dates, and plan to get out after a small move. Buy options out 2 or 3 months, and be happy buying for 3 and selling for 4 1/2 in a week or so. Options get a bad name because people play them so recklessly (as you suggest in you post). Play them responsibly and you can make good money.

To: steve goldman who wrote (2630)	2/27/1998 7:23:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 4969

As usual, well thought out Steve. I agree that aggressive out-of-the-money calls are a sucker's bet. The only value it has in its time premium will be worth nothing at the end of its life span as an out-of-the-money call. Perhaps LEAPS are worth playing this way. I do not know. I find the best call options are strategically purchased at-the-money or just-out-of-the-money calls. Purchase them before others drive up their time premium in their speculative buying enthusiasm helps out. The timing of the purchase right before a good strong move up by the stock is also very helpful to me. Due to the time wasting nature of options, I believe in time stops. I suspect much greater than %70 of out-of-the-money options by two or more strikes expire worthless. Why play with these odds? Why would anyone consider this a necissary risk in order to succeed in trading options? Why make the difficult shore of pursuing profits in the market more difficult than it already can be without making it more difficult through choices like this? The curious thing about the option's premium is that a stock's demonstrated strength in a well-established uptrend tends not to have this revealed in the option's premium. Evidently the concept of volatility that the option is keyed off of and that of a price change through a trend are not the same thing. This is to the intelligent option players advantage. Bob Graham

To: steve goldman who wrote (2630)	3/1/1998 5:36:00 PM
From: rag2rag	Respond to of 4969

in retrospect, I should have flat out sold the stock, but I still wanted the position, just had felt it had room to grow Steve , can you tell us what you of my suggestion below? Sell WDC at current price (25?) Sell naked puts at same or higher price (27.5?) In this scenario you would have cash and also the opportunity to take the stock back at any price below 27.5 , in addition you would also have had the time premium on the puts in your pocket. Thanx in advance, regards jag-dish