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To: otter who wrote (41612)	4/5/1999 2:23:00 PM
From: BigBull	Read Replies (1) \| Respond to of 95453

To be sure, options have their place. I just like the clock ticking against someone else - not me.

To: otter who wrote (41612)	4/5/1999 3:44:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 95453

JungleInvestor, otter: re. options: Here's my 1/16 of a point (that's about 2 cents) on options: 1. Almost always use limit orders. The only exceptions: I sold some nearly worthless puts on December 31, for tax purposes, using a market order. Got 1/16 for them. I will also use market orders for small lots of very liquid options, like 10 contracts of an index option. Otherwise, limit orders should be the rule. 2. Day-trading with options will make your broker (and the market maker) very happy. He'll add up what you're paying in commissions (and the spread), and start pricing that bigger yacht he's been yearning for. 3. If you buy the longest-term option available, and sell it while it still has at least 6 months till expiration, you'll re-capture at least 80% of the time premium. This will increase your initial cost, but also increase your return proportionally. Also, a longer time frame means you don't have to be as smart to make money. Time fixes many mistakes. 4. Selling options means you lose control of whether (and when) you own the stock. I don't like that, but I can see the appeal of selling options, especially in a very scared and volatile market, when option prices are high. 5. I don't use the B-S equations. I just don't like complicated things: too many things to go wrong, too many chances for errors in inputs. GIGO. My strategy: I wait for a quality company to go severely out of favor with the market, and then I buy the longest-term option available, far out of the money. In order to buy, I have to believe the stock will at least double, by the time the option is 6 months from expiration. If I'm not sure, I don't buy. When I buy, I back up the truck. 6. In-the-money LEAPs in quality companies are a proxy for the stock itself. You've taken on a bit more risk, and will get a somewhat higher return. The point of options is the leverage they give you, and this strategy doesn't give you much leverage. 7. The way I reduce risk is to balance my far-out-of-the-money calls with out-of-the-money puts in similar companies, or in an index. The market and sector has to go either up or down. Either the calls or puts have to go up in value, and there is no potential limit to how far in value they can appreciate. On the other hand, there is a limit to how much I can lose on the other side of the hedge. For instance, last fall I bought far-out-of-the-money puts on Novellus, and calls on Applied Materials. These two semi-equip stocks track together closely. A few months later, both the underlying stocks had tripled, much to my surprise. The puts were worthless, but the calls were worth twice the purchase price of all the calls and puts I'd bought. Of course, I'd have done much better if I hadn't hedged, but I wasn't that sure of myself. This is, however, an expensive way to reduce risk.

To: otter who wrote (41612)	4/5/1999 8:33:00 PM
From: Mark Adams	Read Replies (1) \| Respond to of 95453

I like using options from time to time. I'm careful not to get carried away with the number of contracts, limiting myself to what I'd purchase if I went with the stock. One aspect which isn't often mentioned, is that if you buy an at or slightly out of the money option 3-6 months out, and the stock moves against you, your loss is limited to the premium (usually a few dollars). This tends to enforce some discipline on value investors who don't like to cut their losers short. When I own a stock which has gone against me, I'll use options to double down on occasion. Depends on the stock price and the option price; I usually go long stock rather than options for any stock selling under $12, and sometimes resort to options instead of that dreaded margin when I'm feeling fully invested. They are a tool, one that you need to work with to build competence.