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

To: ratan lal who wrote (16086)	4/11/1998 6:53:00 PM
From: James F. Hopkins	Respond to of 94695

Ratan; I can't recall the exact way it works, and don't want to dig up numbers. But at one time I was going to play currency Dollar vs Yen options. In talking with the dealer ( a lot of taking ) we came up with a plan that I bought calls or puts in both, the fair value in time premium was the most I could lose. I could only lose that if they stayed almost flat. The more the volatility the more I could make..the position was based on volatility..straddled not really long or short one or the other, that was neutral. The hope was simply that I lost one compleatly while making much more on the other one. Break even requied a move of about 2.5% one way or the other within a month. After the 2.5% move either way I was ahead if it happened early good, I could take the profit on my winner..re-enter two positions and this time if it went the other way I might even be able to get something out of the old losing position. It was somewhat complicated, and looked real good, but also a little out of my class so I didn't actually get into it. Again if the market went sort of flat you got wacked on both positions. There are plenty of thoes hedge players, they thrive on volatility and or a strong trend , they mostly prefer volatility, as they get out of the profit option as soon as ( it pays for the losser with some (1) profit left over,) open two more and if the trend reverses can ((2) add to that profit by cashing in what was an allmost worthless one,) were if she just keeps trending they only get the (1) profit..and never cash in the other end. --------------------------------- With stocks you need to be selective enough to find were time premiums are not so high..but the stock still shows good volatity ( roller coster effect.) look more towards out of the money put, and calls..not only are they cheaper but they skew percentage wise more than in the money ones which tend to track the stock price more. Were the out of money options have more volatility percentage wise than the stock does it is easyer to hit your doubles ( which pays for the other end ) then hope for a reverse, but just hope ) open the new position position both ways. -------------------------- Compare charts of the options with charts of the stock price, looking for the options that move the most. Here you don't always need to get the same amount out of the money on both sides..like certain puts may be best..with certain other calls best..the thing to balance is the $ amount of the bet, you may have say 10puts..and only 8calls..or the other way around but dollar amount bet is the same you picked each of them because they show a history of skewing the best on that issue, one of them needs to make a 100% move or more to pay for the other. ( this is not to hard in out of money options ) but forget for the time being about being bullish or bearish..focus on the hedge the volatility or the sheer force of any likey trend. Your in the middle of and exploting the fear and greed , of both the bulls and bears. Takes some looking around and a lot of digging and it can be down right boring. ------------------------ Do it easy easy at frist untill you actuall see were it pays off..commissions and spreads are still hard to over come on options so when you look at the history on paper figure your buys at the high and your sells at the low for that day, create a margin of error and don't bet unless it's clear that in the past such and such calls and puts did indeed more than double (there by paying off the other end )and within "what time frame ? " and all that good stuff. Skip the questionable ones fast..go on to others & try hard not to care or let it matter if it went up or down. Say hey they are going to report earnings ..chances are they will move one way or the other..as they have a history of jumping about that time..can I get on both sides and make money? This stock is about to or just at it's resistance level..well thats when it either goes through or drops back..this one is sitting on it's support level..what will it do..taht don't matter as long as it moves ! Jim