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 (9333)	2/27/1999 6:58:00 PM
From: Matthew L. Jones	Read Replies (1) \| Respond to of 43080

AT, The sector spyders are new to me.. When I visited the AMEX this last spring, I got to go down on the floor and talked to the SPYDER specialist at length. They are a pretty cool idea. It sounds like what you are talking about is a sector play version of the same (as opposed to the index). Actually, I have traded options much longer than I have stocks. The internet options typically trade for 8-10% (first out of the money call or put at the full month or near it). However, options on companies like DELL or INTC generally get 4-5% at the money for the full month. If you are one strike away (as I suggested) on a stock with an implied volatility of say 50-60 percent as opposed to the 100% plus volatility on internets, the premium is 1.5 to 2% for a full month... less if you are half way through the option cycle. And the put doesn't have to go all the way to the strike price before the premium goes up. It is pretty well linear appreciation. Go to my website (http://www.mljones.com) and click the option calculator link. You can take a current stock, and option quote (calculate the implied volatility), and then substitute various stock prices to see the premium change. Now, I didn't look up the prices for the example I quoted but I will be willing to bet I didn't miss the percentages by much. As for the sector versions of the spyders, they sound like a pretty cool thing. Particularly for a hedge device against a fairly large diverse basket of related issues. Or for that matter to use as a basket of sector stocks to play long. Probably more of a medium range investment than a day or position trade I would think. I need to check them out. Although they are technically "trusts", they do trade like equities and are marginable as well if they are like index spyders. Thanks for the link. MLJ