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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: md1derful who wrote (1574)	4/10/1998 3:14:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Hello Dr, I'm not exactly an options guru but I'll explain my thinking. Maybe someone else would offer input. If you search on options and pose the question on one of the SI options threads you may get some good answers. I'm just a guy with a little over three years experience in options, who has lost a bundle buying calls, and made a bundle carefully selling puts. There are various more complex options strategies, but none of which to my knowledge provide the potential upside as owning the stock, owning calls or selling puts. A great book on options if yoy're not aware is "Options as a strategic investment" by Lawrence McMillan. There is also a synthetic long position that can be created by buying calls and selling puts that gives you almost the same profit loss potential as the stock buyer. I look at what I do this way. I can short Dell, AOL, Yahoo, AMZN etc and possibly make a lot of money...but preeetty risky business. I can buy Dell, AOL, Yahoo, AMZN etc and possibly make a lot of money...but preeetty risky business. I can buy TBR, which IMO is no where near as risky, but this takes a lot of cash (I owned the stock till it got called at 120). I can try selling covered calls against my stock, but this stock is volatile enough, and has enough potential upside that you may lose your stock (if I personally owned the stock I'd still sell calls against it). I can set up a million and one different variations of options spreads which I used to do, but the upside potential is more limited, and you're ability to get out fast in a pinch is generally more costly. Or I can buy close to the money calls, or sell close to the money or in rare instances in the money puts. I personally have not had good luck buying calls. When buying a call the stock has to go up to make money, and every day that goes by without upward movement, the options works against you. In selling puts however, at least the ones I sell, the stock can go up, trade sideways, and in most cases go down a few points before I'm in a loss position. For every day that goes by that the stock trades sideways, the options work for me. If the stock is trending downwards, there is usually time to get out without much of a loss, unless you wake up and the stock has gapped down 10 points at the open which has happened to me, but has always recovered quickly. In the case of the case of the 130 puts I sold, I received 6 3/4 for the second position I sold, with the stock at 130. That means that as long as the stock is above 123 1/4 at expiration I break even commissions aside for purposes of conversation. So the stock can go up, or trade sideways and I'm in profit mode it can go down as much as four points and I'm still not looking at a loss. Bottom line, in my mind, and from my experience, selling naked puts is safer than almost any other strategy including owning the stock in the case of TBR...and although the margin requirement changes with the stock, each position of 10 only requires 25K in margin plus the current premium. On Thursday, I almost took the more conservative route and sold the May 125's at 4 3/4...that would have left me in profit mode with the stock at anything above 121 at expiration. It doesn't hurt that I don't mind buying the stock if that's what it comes to. Selling puts is a method many investors use to buy stock, quite often at a savings to buying the stock outright. Bottom line, I wouldn't recommend selling puts to anyone who feels uncomfortable with it, but in my experience so far, there's lots of money to be made as long as you're careful. I maybe getting a little too brave, but feel this stock is in a very unique position that you just don't find everyday. I hope I don't live to regret these words. My thinking may be way off base, but it's been working for me. Buying calls has been working for you, and maybe the way to continue for you. I as well as the Dr would appreciate any comments anyone else may have on this issue. Dr, please let me know what you find. Happy holidays and good luck to everyone. sf