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Technology Stocks : Seagate Technology -- Ignore unavailable to you. Want to Upgrade?

To: manohar kanuri who wrote (6586)	1/8/1999 12:02:00 AM
From: William Epstein	Respond to of 7841

MANO; Good question and certainly not OT. In the last seven out of eight years the stock shot up in January. Last year was the only year it didn't and even then, it moved up in February. That gives it a a one in eight chance of failure or about 12 1/2%. However, I guessed there might be a 12 1/2% margin of error giving me 25% at maximum. By buying Feb. 30s, in the money calls I cut the risk back to just the margin of error since it rose in Jan. or Feb. 100% of the time or about 87 1/2% correct. By calculating the average price increase of 37% for the eight years and noting that the smallest increase during the eight years was 18% and then, selling before it reached that point I guessed that my margin of error had narrowed to about 2-3%. Now, anyone could dispute it and I don't claim to be a mathematician but there is no question, that given the basic odds, combined with the precautions I took, the outcome had to be overwhelmingly, in my favor or a CALCULATED RISK! Which is very different than betting and buying naked puts or calls is usually betting by any definition. All of the above is the reason I was sure I could do it on margin which gives the round trip a certain degree of elegance. PHOTOMAN