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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: S. Chiang who wrote (42662)	5/8/1998 10:17:00 AM
From: donald sew	Read Replies (3) \| Respond to of 58727

S.Chiang, Lets say the OEX is at 430, and the 440 calls are 2 bucks at that time, and you feel the market will move up so buy the 440 calls for 2.00. As the OEX moves up, lets say 5-7 points, the 445(1 strike price higher) becomes 2.00 to sell. Then you sell the 445's for 2.00; therefore you have a break even situation and cant lose, but you can make maximum 5.00 per call if the oex continues up and is at or higher than 445 at expiration. This strategy is quite complicated and must be studied carefully since the are alot more variables involved such as time value deterioation. There is a whole lot more involved than the simplistic example I gave above. Previously, I had bought the OEX 540 PUTS for 4.75 when the oex was at 543. It went down about 5 points and I sold the OEX 530 PUTS for 3.87, so my capital at risk was only 87 cents, but I had the potential to make $10.00 (difference of the strikeprice) minus $.87. Since I did not want to play the news this morning, I closed out of both positions yesterday by selling my 540's for 12.50 and buying back the 530's for 7, which gave me $5.50 - $.87 = $4.63 profit, which was a 97% gain over my original investment of $4.75 or a 532% gain over the adjust risk capital of $.87 once the second leg of the spread was initiated (selling the 430's). Seeya