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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (14927)	10/30/1998 10:56:00 AM
From: Marconi	Respond to of 18691

Hello Christian1310: I agree that a synthetic could be more linear than a naked call. I try to position to ride the 'bump' of the nonlinearity of near options pricing favorably. The underlying assumption one should take for your example of writing a C90 and P140 for AMZN is that AMZN will not tank. Buying some well out of the money near term puts could afford protection on the downside tanking risk. I have not looked closely at the possibilities, but your example weighs in my mind as a lot of capital tied up for a modest return, and I don't think it is a clearcut riskless arbitrage position. And I don't think AMZN is set for a surprise run over 150. I think my heart is in the right place, but my pricing sentiments are not well heeded by the market...I am estimating much as every one else does. My inclination is to shoot monthly for the 10 point time premium when AMZN seems to be near a high point and be satisfied to capture the majority of that time premium. Generally I clear AMZN options positions before expiry. I understand AMZN is held institutionally. Instinet could be used to monitor overnight dumping by institutions. I don't have the wherewithal to do 24 hour monitoring of AMZN. I suspect the tanking will occur overnight--my nearest guess at the factor would be a successful injunction by WalMart to remove WalMart trade secret information from the Amazon order system, followed by a visible lawsuit for damages. And a gap down opening for the NASDAQ market for AMZN. I think it is a possibility with some merit, and should be factored into downside considerations. Pretty hard to quantify though. Things were clearer when it was mania this summer when nothing made sense, or were they??? Best regards, m