Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: RWS who wrote (15277)	3/27/1998 12:54:00 AM
From: James F. Hopkins	Respond to of 94695

Rws; I have done that..but only on stocks I really would buy if they dropped back to that point. Like I didn't sell write puts on CPQ..but I was tempted and had she fell to about 22 I might have..but I bottom fish a lot in spite of all the don't catch a falling knife stuff.I bottom fish..( but not if the market itself is going down like in a bear market ) the best bets in a bearish market are the MEGA caps..if you can find some cheap calls on them. Thing is with writing puts , they tie up capital so it has to be weighed aginst if I want that capital available for calls..and or some bargain basement stocks. Like you say selling the put actualy adds money to your account, but it also means you have to keep money to pick her up if need be. In effect you are invested but at a cheaper price, and your gain is limited to what you got for the put. If she pops up real fast..like with a buy out or such you don't get as much of her upside. ----------------- I'l use CPQ..say when she hit 23-1/2 you said I'll take her at $20..and went out to were you could get 2.5 for 22.5puts.. if she pops up you get the 2.5..( but not until they expire ) depending on the options you may have been able to buy the stock for 23-1/2 and write calls getting 3-1/2 for your calls, making the stock $ 20 to you, but these calls could be say out of the money at $35..and your still invested at $20.. Just the same from the put angle the writer has an edge over the buyer, if all things else are equal. -------------------- If I write calls they are out of the money, but if I buy I prefer to buy calls in the money, in some cases I may buy out of the money calls if they are dirt cheap, like I look and see if most of the calls already sold at that strike went off a lot higher to the previous buyers, any up turn and some of them will want to average down, gives you a good secondary market. Oddly enough they seldom try to average down until the stock turns up..so trying to pick a bottom you think you can live with..you have to try to call it before she turns up..even if you miss it some..thoes early bets give you some cushion. ------------------------ I don't think option programs that do all that facny stuff and measure volitility and stuff are worth a flip. They don't measure human nature..or look to see how many people are in pain. If your going to make money in options thats exactly what you are exploiting..( others pain )..option programs don't mearsure that, ( in fact they more often than not create it ).. percentage wise just the over head in options ( spread and commissions ) creates a nut that says at least 60% or more have to lose money. Then in most cases after an option is wrote it may get traded several times, and each time adds to the "nut" as that "nut" grows it says less and less betters will make money off that particular contract ( brokerage house and specalist get more and more of the profit in it )...the program dont read the nut, or tell you were you are in respect to it or the other players in that pool. -------------------- I had one person tell that for every loser there was a winner, that is not so because of the "nut" and that expense may be compounded several times often it can exceed 50% the price of an option ..easely making two or more lossers for ever winner...it can be tough..and the volume in them tells you something about human nature also..2 out of 3 people think they are smarter than 2/3rds of the other people playing options, thoes kinds of numbers don't add up..we all know that 2 out of 3 cant be smarter than the other 2/3rds, but I'v study options enough to know 2/3rds of the players in options think they are, or that their fancy program or some system out of a book, will give them the edge they need, it's the same thing at the race track..tip sheets, and systems book abound, many of them look like they make sence..( I got a system that wins at the dog track ) but if I were to ever publish it, it wouldn't last long. or do near as good as it now does <G> Jim Jim