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To: prakash who wrote (32927)	3/7/1998 1:26:00 PM
From: K. M. Strickler	Respond to of 176387

prakash, I don't do options, and have no experience, but I have some stuff coming to me in the mail! I don't know that I will get into that, because in a way that limits my ability to get out of a stock that is not performing unless I unload the option, and that takes a buyer. I have a lot of friends that consider themselves lucky to 'break even' in options! Regards, Ken

To: prakash who wrote (32927)	3/8/1998 4:26:00 PM
From: Jim Patterson	Read Replies (1) \| Respond to of 176387

re: <<<I don't know if any of you have ever established a bear spread. I am thinking about starting one on monday. If I long Mar 505 at 7 3/8 and short Mar 500 at 5, I will be establishing a credit spread for 2 3/8. If by end of march OEX closes at or below 500, I will make $5 from this spread. Given the fact that S&P is at its record levels and the warnings and earnings season has just begun, I think this is a reasonable risk/reward. $5 from $2 3/8 (before commissions) in two weeks doesn't seem that bad. >>>>> First if You are long @ 505 for 7 3/8 and short 500's for $5, You have a debit spread. You paid more than you took in, Hence the debit. If you are long 505 puts @ 7 3/8 and short 500 puts @ 5, you have a debit put spread. Than means you own more put than you sold. If you expire @ 500, then you will make 2 5/8 Pre Commission. If the index goes out at 502 5/8 you break even. You are left with 2 3/8 from the 505's and keep the 5 from the 500's. Add in commisions, and I bet break even is arround 501 3/4. This is just a guess, Hope this helps. Jim Hope this helps.

To: prakash who wrote (32927)	3/8/1998 5:39:00 PM
From: AlanH	Respond to of 176387

I don't know if any of you have ever established a bear spread. I am thinking about starting one on monday. If I long Mar 505 at 7 3/8 and short Mar 500 at 5, I will be establishing a credit spread for 2 3/8. If by end of march OEX closes at or below 500, I will make $5 from this spread. Given the fact that S&P is at its record levels and the warnings and earnings season has just begun, I think this is a reasonable risk/reward. $5 from $2 3/8 (before commissions) in two weeks doesn't seem that bad. Given the above, you could only establish a credit by using a ratio spread. That is, you would need to short more contracts than you're long. If spreads are relatively new to you, I would strongly advice that you avoid OEX options as your laboratory. OEX options are an oddity because they are cash-based, American-Style index option. What does this mean? Your Mar 500 (shorts) can be assigned at any time up to expiration -- reducing your hedged position to fully exposed.