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

To: NateC who wrote (643)	2/25/1999 11:55:00 AM
From: KFE	Read Replies (2) \| Respond to of 2317

Nate, <<<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 >>> Paper trading excellent way to test trading strategies. Plan on doing some myself. Suggest you include commissions in paper trades especially if you are going to roll options over. You should be able to get some fills at prices better than bid/asked. I would try to avoid any trade that would have a limited gain with an unlimited possible loss. This trade would have a max. gain of 7-7/8 and an unlimited loss possibility. If you cover the 80 puts when the stock breaks 80 that will probably leave you with a 2 pt. loss in the 80's short term. That will put your max. loss at 9-1/8 (7-1/8+2). This leaves you with a potential gain/loss of 7-7/8 to 9-1/8 with the stock currently 6+ points above your break even point with 3+ weeks to expiration. This would be an acceptable risk/reward if you you are firm about covering the 80's and monitor them closely. Good Luck Ken