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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (15276)	3/26/1998 10:24:00 PM
From: RWS	Read Replies (1) \| Respond to of 94695

Jim, Thanks again for your commentary. What do you think of the strategy of selling puts on stock you feel will move up. I've been looking at several and seems I can make profit if stock moves up without any drawdown in my cash. TIA RWS

To: James F. Hopkins who wrote (15276)	3/26/1998 11:18:00 PM
From: William H Huebl	Respond to of 94695

Jim, Good observation... whist I had taken THAT advice thousands of dollars ago. Bill

To: James F. Hopkins who wrote (15276)	3/29/1998 5:32:00 AM
From: paulmcg0	Respond to of 94695

Jim -- after giving it some thought, here's a database filter I came up with to find budget priced calls, along with the rationales. Quick Ratio > 0.8 -- the company has enough cash to cover most of its immediate expenses and won't get into a cash flow crisis. Sales To Price Ratio > 0.5 -- normally, when private companies buy each other they pay only 2 to 3 times the other company's annual sales (look at the absurd valuations in this area on stocks like Yahoo! for example). I would choose to buy calls on stocks that are currently cheap, i.e., the market cap is less than 2 times annual sales. Debt to Equity Ratio < 25% -- debt limits a company's freedom -- if sales fall the company will be hard pressed to pay the interest and principal it owes Current P/E Ratio / Historical 5 Year Growth Rate) <= 0.5 AND (Current P/E Ratio / Historical 5 Year Growth Rate) > 0 -- this is the famous PEG (price/earnings to growth) ratio mentioned in various investing books, including those by the Motley Fools. Paul McGinnis