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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (5793)	1/17/1999 1:21:00 PM
From: Shane M	Read Replies (1) \| Respond to of 78476

I sell naked out of the money calls. If the stock remains out of the money I keep collecting premiums. If it gets into the money, I roll the calls out and sometimes up (depending on the premiums). So I effectively become short the stock because the options are in the money and can be rolled down if the stock price falls. Wayne, I'm not familiar with your terminology. What do mean when you say "roll the calls out and sometimes up" and "can be rolled down"? If you're selling calls and the stock continues to rocket up why would you still not get killed? Thanks, Shane

To: Freedom Fighter who wrote (5793)	1/18/1999 12:40:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 78476

Ditto Shane's questions for me. This strategy is very intriguing to me since I have never traded options, but it sounds too good to be true. For this to be as low risk as your post suggests, there's got to be a stop or something in mind. But with naked calls, you could still get murdered if the stock gaps up on you. Please elaborate, you've got me very interested and I've got a couple stocks in mind for this. I never thought of using options for anything except a greedy play on a quick move up (i.e. long a call option) or a chickens%$t short (i.e. long a put option). Short a call is very intriguing in certain situations. Jim

To: Freedom Fighter who wrote (5793)	1/18/1999 1:23:00 AM
From: James Clarke	Read Replies (1) \| Respond to of 78476

re: REITS Barton Biggs, a Morgan Stanley strategist you should always at least listen to, focused on REITs in the Barrons Roundtable published today. Forget which ones he picked, when Barrons grilled him on the stocks it was clear he doesn't know one from the other. But what he is saying is that as a bear on the market, I want something with a yield above treasuries and with asset value. [My background is in real estate, and thus it is no coincidence that my best picks on this thread were real estate oriented (SJP, TRC), though I also posted a REIT as one of my favorite picks a year ago. It went up precisely zero for the year, which means it was a top performer among REITS. Which is like being the most truthful statement in Clinton's grand jury testimony. I cover REITs institutionally for my firm, and in full disclosure, the first three are positions my firm owns. But also in full disclosure, my firm owns six other REITs. These are the ones I would buy now.] Colonial Properties (CLP) very conservative, excellent management, dominate Alabama (who's going to bother them?), 8.5% yield. This is a management that has grown earnings (FFO) at about 12% since its IPO in 1994 and has increased its dividend every year but the stock has gone from 23 to 27. This is the most honest, conservative mangement team you could ever hope to meet. You want to buy this under 27. Don't expect excitement, but you'll make a more than fair return given the limited risk involved. Chelsea Realty (CCG) - Without question the best company in the factory outlet sector. They have the best locations and it follows that the get the best tenants. You will find traffic jams entering some of their properties. Yields 8.1%. Buy it under 35. Public Storage (PSA) - Without question the leader in consumer warehouse storage real estate. Their national branding strategy is introducing economies of scale into a mom+pop business. Their occupancy and especially rental rate increase numbers have been stellar. But the stock has not moved. This is not a dividend play like the others because PSA management has skirted the REIT rules a bit to reinvest the maximum of retained earnings. Which they should. If you look at this one, don't think REIT, think McDonalds circa 1972. I consider this a buy under 30. Eastgroup Properties (EGP) - An excellent company in the industrial (warehouse) sector. Their track record is excellent and I can vouch for management's honesty. These guys have a good track record and they are good people. The properties are worth 20+, so if you get a shot at 18, its a buy considering its 8% yield. And remember, warehouse is probably the most conservative class of real estate property. And, the least conservative class of real estate, and the most beat up, hotels...There is risk here. duh. My money is on LaSalle Properties (LHO - $13 1/2). It ran big on Friday, so be careful. My target price is about 16. If you're considering an investment in this one, wait a few days and you might get it closer to 12. Even at the spike price at Friday's close, the dividend yield is north of 12%. And this is another one where I can personally vouch for management's honesty. I wish I could vouch for the hotel sector's growth in 1999, though things look a lot better now than they did six months ago when LaSalle went public at 18. JJC

To: Freedom Fighter who wrote (5793)	1/19/1999 8:13:00 AM
From: Bob Rudd	Read Replies (2) \| Respond to of 78476

<Shorting overvalued stocks..selling calls> Glad to see ideas on how to capture widest spreads between intrinsic value and price. However, 90% of option players lose. The ones that win usually are selling rather than buying premium [like your suggested strategy] and are full-time professionals with real-time info - quotes and arbitrage model calculations & access to lowest bid-asked spreads. Occasional players dabbling in strategies are their lunch. Occasionally 5 sigma events blow the pro's out of the water when something that can't happen does [Crash of 87 produced lots of this, also collapse of Long term Capital Management]. Highfliers like net stocks can and do gap up beyond reason or estimation. Premium expansion in response to these moves can be unpredictable [A bad thing when you're short premium]. Any strategy involving selling puts or calls should IMO, be preceded by calculation of maximum adverse move impact..and adjustment of position size or use of spreads to limit risk. I think the CBOE offers info on basic option strategies to provide overview..for more in depth treatment, Larry McMillan has authored some of the most highly regarded books on option strategies. I don't do options for many of the reasons listed above..prior exploration lead to those observations. BTW: Since many on this board consider the subject of shorting high-fliers..and the exploration of strategies for doing so, to be outside the realm of value investing, should we consider moving further discussion to John G's Shorting stocks: High fliers forum: Subject 15251 Most of the folks that post there have primarily fundamental, research-driven orientation.