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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures -- Ignore unavailable to you. Want to Upgrade?

To: Peter Smith who wrote (6329)	10/14/1998 11:14:00 AM
From: Tom Trader	Read Replies (2) \| Respond to of 44573

Peter--your friend should not be concerned about his GE assuming that it is a longer term investment. GE could/should decline if the DOW retraces/retests its recent lows. At that point, I intend shorting two to three times as many puts as I am long -- a strike or two lower than the strike which I am long with the intention that if it closes below the level which I am short at expiration, I'll own the stock -- which I would like to own--but at a lower price than where it is at right now. I'll also be protected on the downside for part of the position with the long puts. If it does not break the levels that I am short then I lose nothing and should in fact make some money since the premiums that I will pull in will exceed the cost of my long puts. I am looking at doing this with a number of stocks that I would like to own at much lower prices -- the risk in this strategy is that there is no pull-back and therefore I am not able to short the puts and so I'll lose all or part of my money on the longs -- which is why I am going out to December. Second, I end up owning the stock and then it continues to decline -- and I shall deal with that by taking other protective action. The overall assumption is that we will see more weakness in the market and that this may continue for a while -- but that we are not looking at a Kahuna. Like most things that I do, there is more than meets the eye:) If it were a pure short play, I think that there are better plays than GE. Regards