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Strategies & Market Trends : Trading For A Living -- Ignore unavailable to you. Want to Upgrade?

To: the options strategist who wrote (281)	5/27/1998 2:25:00 PM
From: Nemer	Read Replies (1) \| Respond to of 1729

Jen: ----"buy it (stock) and short it against the book, and sell puts..." means. lets see if I understand the question fore I attempt to answer.... 1---- buy it ----- I suppose this you do understand..... 2 ---- short it against the box ---- means that you "sell short" stock that you already own .... 3 --- sell puts ---- several possible motives will preceed this action... ....... a) .... you feel that the stock will increase in price and wish to profit from your analysis so therefore you can place the moneys generated from the sale of the puts into your pocket...... ........b) .... you feel the stock will decline in price but will only be a temporary decline and you feel comfortable owing the stock at the "put price"and the revenue generated will effictively lower your ownership price........ ........c).....there are multi more reasons.... Regards ---Nemer

To: the options strategist who wrote (281)	5/27/1998 2:40:00 PM
From: dpl	Respond to of 1729

>You buy the stock but don't understand "short it against the book"< I think you mean "against the box" This means that you are short and long in the same stock at the same time.The term"against the box" comes from the old days when someone would have their shares safely locked up in their "strong box" This is different than "locking up greenbacks" :-) David

To: the options strategist who wrote (281)	5/27/1998 6:55:00 PM
From: Eric P	Read Replies (2) \| Respond to of 1729

Jen: Active daytraders will sometimes have two trading accounts that can provide collateral for each other. One account will be their "long" account and the other will be their "short" account. Once set up, the trader can set up a long position in one account and offset it with a short position (initiated on an uptick) in the other account. This cross collaterallized position only requires ~5% margin to maintain. ==> Why bother to short against the box like this??? The trader now has the ability to go net long by buying additional shares in his/her long account OR, he/she can go net short by selling his/her LONG position, leaving the non-offset short position behind. The benefit achieved is that the trader is now able to enter a short position without regard to the downtick rule. This is because the trader is no longer "selling short" he/she is merely selling their LONG position. I hope this is clear. Good Luck, -Eric