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Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: Joe Waynick who wrote (45)	7/18/1998 2:52:00 PM
From: grenouille	Read Replies (2) \| Respond to of 355

Joe, Congrats on your CSCO profits and thanks for posting your CSCO plays and the reasoning behind them. I hold CSCO (only 200 sh, which I would like to increase...naked puts??), but I haven't considered it for CCing because of the low volatility (20 day @ 21.8 and 6 mo @ 30.2). So, while you are off to the bank, I watch the trains leave the station. Let me tell you how I am seeing your CSCO play and tell me, if you would, where I'm going wrong. On 7/13 CSCO closed @ 94.25 on average volume, with a high and a low for the day of 94.69 and 92.38. This was slightly higher than the day before, but about even with the day before that. And, although the stock had enjoyed a nice upward move from 79.94 where it closed on 6/16, it had been trending sideways on average volume since 7/2. CSCO had been trading in the upper area of it's BB, and at or above it's 20 day moving average. RS, although declining moderately as the stock trended sideways since 7/2, was still above 75. To my mind, at this time (7/13), this stock could go either way. I see no indicator showing CSCO either overbought or oversold. Herm (and Doug) has taught us to use BB & RS to help us determine near-term price movement. As I interpret his application of these technicals, we should consider writing naked puts with an RSI of 30 or below and price at or approaching the lower Bollinger Band. This indicates an oversold condition which could lead to upward price movement near-term, thus increasing the probability that we will pocket our PUT preemy without assignment. So, based on the above, I would not have written NP on CSCO on 7/14 (probably one of the reasons my account shows a current deficit!). In fact, based on the BB and RSI at the close on Fri 7/17, I would now consider writing AUG 95 CALLS @ 7 3/4 - 8. What do see wrong with my thinking? Regards, -Bob W