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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: tuck who wrote (10736)	5/11/1999 6:59:00 PM
From: tuck	Respond to of 14162

Ryan, Buying 4 Edify June 10 puts for the same money as 8 7.5s works better for me, given my expectations. I figure if the stock goess to 10 as in Scenario 1, those puts will give me an additional $500 or so, bumping my unmargined return to 18% for two months from 12%, or margined one month return of 13% versus 9% for the 7.5s. In Scenario 2 I get a lot less than with the 7.5s because in the money puts don't hold time premium well. It might give me $800 - $1000, for a two month unmargined return of 12%, or a margined return of 9%/month versus 16% for the 7.5s. Since I think Scenario 1 is more likely, I think I'll buy the four 10s. Should the outlook still seem bad at that time, I can roll the puts to 7.5s. A good exercise! I think the PHLX greeks relate more to the theoretical value of the option than the actual value, which makes them almost useless when the options are selling for something entirely different than the theoretical value. In Edify's case, the puts are particularly guilty of this. Check it out at: fast.quote.com Check y'all later, Tuck

To: tuck who wrote (10736)	5/12/1999 10:11:00 AM
From: Jonathan Thomas	Read Replies (1) \| Respond to of 14162

Tuck, In each scenario except the last one (the stock doesn't drop), the puts will increase in value, increasing your profit margin. Even a 3 point swing will most likely make you a point of profit on the puts, more if you go with the June 10s. I think you would most likely make money, and at the least, cover a downside. If you don't see it coming back at least 3 points, don't bother, but I would buy them, hoping to get something for them on a dip. This stock is too jumpy not to to get down enough to turn them into a profit (IMO). BUT, you know more about the fundamentals than I do. Let me know what you decide to do... Ryan