Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: AlienTech who wrote (9324)	2/27/1999 6:30:00 PM
From: Matthew L. Jones	Read Replies (1) \| Respond to of 43080

AT, I typically get filled between the spread (unless the stock is dropping like a brick) and often at the bid (going long). I don't short options unless it is covered write and that strategy is not particularly a good one in a choppy market like we are having. When you say spiders, do you mean S&P depository receipts (SPY)? In other words, if the market goes south, short spyders? If that is what you mean, the problem is that the index moves much slower than the individual issues or even the sectors (that's its whole point). Let's say the chips were getting whacked, you could see which ones were out performing the group on the downside (ie, pull up your chip watch list and look at the percentage movement column) and buy puts on say INTC and AMD. If you bought one strike out of the money, your expense would be maybe 1.5-2% of the market price (if the stock was selling at $100, the option might be $2). Your maximum downside would be $2 and you would have a month for the option to revisit some low in the vicinity. If you sold the option back the same day or so, the time value lost would be nominal and the intrinsic value would be tied to the price of the underlying issue. Option prices move much slower than stock prices and lets say the stock dropped $3-4. Your put might only go up 3/4. The rate of return after commission and minimal slippage would be 15-20% with very minimal downside. That beats the snot out of the downside risk on a fast moving stock. (at least to me).