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Strategies & Market Trends : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: KFE who wrote (634)	2/24/1999 7:34:00 PM
From: NateC	Read Replies (1) \| Respond to of 2317

<When I was actively doing OTM credit spreads these are some of the filters I used to look for possible trades. Short option at least one strike out of the money. 5 pt. differential between strikes- net credit of a least 2 pts. 10 pt. differential- at least 4 pt. net credit.>> Ken...thanks for these words of wisdom. Here's a trade I've thought of on the basis of today's numbers. Is this crazy (have I been listening to too much Wade Cook)??.....or do these numbers sound feasible.?? Buy 1000 Shares of DELL at today's close 83 1/4 -$83,250 Sell 10 March 85 calls at bid 4 + 4,000 Sell March 80 Put at 2 7/8 (bid) + 2,875 buy March 70 Put at 3/4 - 750 ----------- -$77,125 You now own Dell effectively at 77 1/8. You get called out at 85 (you could do a sideshow 100 call...@ 7/8....to protect the upside Obviously if Dell slides under 80.....you'd probably buy back that 80Put at take a bit of a hit. what about risk reward here Ken....You put more than $6,000 in your account on your $83,000 investment. would appreciate you more experienced hands at evaluating this one. Just a paper trade mind you! PS....Wade and his "crazies" (I haven't decided if they are are not)..would say.....If the stock falls.. (no problem)..just buy them back, and turn around and sell the April 80, or 75 puts....