Market having another good day.

Market looking pretty good. I bought some GE last Wednesday at a little over $25. Sold the September $25 Calls for $2.19. Damn, I should have waited. Also bought some more GE Friday at $27.59, have not sold any calls against these shares. I could get $1.70 a share for the Sept. 30 calls.

So Fellow Investors what do I do?:

1. Sell the Sept $30 calls and protect my down side.

2. Do nothing as this is a true rally and the stock is on its way back to $45.

3. Sell if the stock hits 30 or so and run.

4. None of the above Ben, you should---

Cowards

You guys are no help to an old man!

GE closed at $30.15.

I could sell the Sept. 30 Calls for $2.00 or get greedy and wait?

I would sell the calls, but that's just me. You know I am a big proponent of covered call selling.

Please be aware that this has risk and you could lose all your money.

I think I may follow your advice.

If I wanted to be super conservative I could sell the Sept. 25 Calls for $5.70. The same calls I sold on my other GE calls for last week at a little over $2.00. Some Option buyer really cleaned up on buying my calls last week.

I'm no options expert but it seems the volatility is huge right now and who knows how far the market will go either up or down. So unless those call premiums are really high being short the call and long the stock might not be as good as it usually is.
Personally I expect the mkt to rally into Aug 6 and then reverse lower. Why that date? A) its a big spiral calendar date that may well mark a reversal and
B) the mkt will anticipate the accounting skeletons coming out of the closet around then prior to the 8/14 deadline. The home run strategy might be to sell the call, then if the market rises sell stock and buy back the call and buy multiple cheap out of the money puts.

What do you guys think about this?

http://www.vtoreport.c%6Fm/nasdaq/nasdaq-djia-detail.htm

apples to oranges, or a fair comparison?

executive perp walks, now that's good TV!!!!

fucking bastards

Damn Ootie,

Your 8422 is looking pretty good. Just off by a little over 100 points as we speak. 8553 DOW

The market would have to drop another 500 points for Kendricks to be right.

I sold the Aug. 25 GE calls on all my shares (per Kendricks advice) and feel pretty good. I received approx $3700 on the calls and will lose $1900 on the sell of the stock. That assumes GE stays above $25 until August16th. I also have downside protection (breakeven) to $23.78. Not a bad return for approx 22 days. I like owning GE and feel either way this goes is fine with me

I think the market is over bought based on stock evaluations and feel our next move is down.

If it drops below 25, you could always sell some more calls when the current ones expire, put some more cash in your account, and buy some more downside protection. Not a bad deal, really.

I could also buy these current calls back and write new calls at 22 1/2 if GE starts trading around 25. I have been using that strategy for years.

I once , a few years ago, bought 300 shares of QCOM at around $40 and worked the cost down to under $19 over about 1 1/2 years. Finally got called away at $65. Of course, after that QCOM went all the way to $200, before its current price of $25. Some stocks like QCOM pay very good premiums on their options.

Ben, that is brilliant. I just checked their option prices, and even though QCOM closed today at 25.61, the August 25 calls are bid at 1.90, and the August 22.50 calls are bid at 3.50. Selling a covered contract at either of these prices definitely looks like a winning proposition (although for an opening trade, I am leaning toward the 25 calls).

My one question is: how is it possible that option premiums with so little time value left are so high on a stock with such an outrageously high P/E ratio, given the current market sentiment? I am not disputing a word of what you are saying, I am just curious as to why this is.

Volitity.

Remember the gamblers(buyers of the calls are typically, will gamblers. They are willing to risk 100% of their money for the chance of a double or triple in a very short time.

Many could care less about the fundementals of the company. They are just looking at the intrinsic and time value of the option.

A stock like Qualcomn that is way down and has a history of volitile moves up and down is a stock that option buyers are willing to pay a good premium to buy.

Remember, buyers are hardly ever buying these calls because they want to own the stock. They are simple betting it is going to dramatically go up(call) are dramatically go down(Put). They usually sell the option before they ever really put down the hard cash and take the stock.

We are the casino and know that probably 75% of the time these options expire worthless. In fact just like the casino we need the option buyer to win sometimes or they will quit playing the game/gambling. "Hey Ken I was in Las Vegas last week and won $1000." Great promotion for the casino

This last ralley was great for option buyers, but option sellers like me have done just fine.

I have been doing this a long time and I am still learning new things every day.

Thank you, Ben, that makes perfect sense. In looking at the transactions I have made recently, I notice that some of the premiums I was paid offer a much better percentage gain than others. In the future, I will add "pays an above average premium" to my list of criteria, so that my capital is concentrated where better returns are possible.

I also like the fact that QCOM has no debt and is trading at the bottom of its range. I know you mentioned before that you only do this with a stock you wouldn't mind owning if it does drop in value. Which fundamentals do you think are the most important?

It varies from stock to stock, but I never buy a stock that number I like the management and the companies business.

In this market I think you have to definitely look at conservative fundementals(unlike the mid 90's when growth was king) like value, PE's of under 18 and some growth. I think dividends will continue to become more important(which is funny). You mentioned low debt previously which has some weight, but some industries such as banks always have a high debt to equity because of the way you have to account for bank deposits.

I guess you just have to be conservative yet have good instincts about stockd. It is an art form as much as a science, unfortunately

unless number one

To much scotch, sorry

unlessber one num

Toch mu scotch, sryor

Dogster,

You are not very nice.

Ben thinks you should be more understanding of his afflictions.

Has anyone heard about August 14th being a deadline, imposed by the SEC, for the CEO's of all publicly held companies to sign, and submit to the SEC, a statement of accuracy on all current financial statements? By signing this statement, the CEO's will be personally bound, and legally liable, by the accuracy of all published financial results. As I understand it, after that date, the SEC claims that they will publish a list of those companies who haven't sent in the required forms. Is this correct? I haven't heard anything that even remotely resembles such an action. Someone I respect very much just told me.

Yes, it it true, Sam. See http://www.newsday.com/ny-bzsign312804510jul31.story

straight from the sec

http://www.sec.gov/rules/extra/ceocfo.htm

I think it's 1.2b market cap and above.

BTW the DOW finished the week at 8,313.13, believe I predicted 8,264 using the simple assumption that the week before would be repeated.

Therefore, next week, 8,313 (if we're lucky).

And the winner is Ldvee.

Ok who guesses for next Fridays close?

I guess 7,400 for 8-9-02.

I am going to say 7850 again.

Kendricks,

Glad I followed you advice and did in the money calls on GE.

I doubt GE will be below 25 on August 16th., but I sure am sleeping well at night. Taking the larger amount of money on the August 25 calls and giving up the profit on the sell of the stock feels good right now. GE closed at $29.50, down a $1.90 on Friday.

Its nice when you are rooting for a stock to go down. A close at say $24.50 on Friday the 16th would be just about perfect.

Ben, I took some of your advice, too, and bought some QCOM at 25.55, and sold the Sept 25 call for 2.8.

I just finished getting laid, and the world looks a little brighter than it did when I made the 7,400 prediction. I revise to 8,450 for 8-9-02.

Good luck on Qcom. It would have to break its three year low in order for you to be upside down on your trade. Even if it is below $25 on Sept. 20th it would work well if it was at $23 or $24. You could also go defensive if it is under $25 in September and write the Oct 20"s and pick up $3-$4 bucks to lower your risk.

I am losing approx $12,000 right now on QCOM that I bought in January. Below are the various options and dates I did the trades. I could buy back the QCOM Sept. 35 Calls for approx $100. I received $1295 when I sold the calls on July 22. I could sell the Sept 25 calls for $2800 or the September 30's for $900, Probably buy back the Sept. 35 calls on Monday in any event and maybe just wait and see what happens. I would be losing $23,000 if it wasn't for the options I wrote this year.

It may take me another 6-12 months, but I think I can slowly work myself out of this problem.


Options Account
Qualcomm
Price
Date Description Price Per Share

1-07-02 Bought 1000 Shares $48,255.00 $48.26

1-07-02 Sold 10 April 40 Calls ($11,095.00) ($11.10)

1-07-02 Net Cost Per share $37,160.00 $37.16

2-21-02 Bought 10 April 40 Calls $1,205.00 $1.21

2-21-02 Sold 10 April 35 Calls ($2,395.00) ($2.40)

2-21-02 Net Cost Per Share $35,970.00 $35.97

3-04-02 Bought to Close 10 April 35 Calls $4,955.00 $4.96

3-04-02 Sold 10 July 45 Calls ($2,295.00) ($2.30)

3-04-02 Net Cost Per Share $38,630.00 $38.63

7-19-02 Options Expired

7-22-02 Sold 10 September 35 Calls ($1,295.00) ($1.30)

7-22-02 Net Cost Per Share $37,335.00 $37.34

Kendricks

The following is a work sheet of your trade. I did not adjust for your trade costs.

8-2-02 Bought 100(or what ever) at $25.55

8-2-02Sold Sept 25 Calls to open at ($2.80)

8-2-02 Net Cost Per Share $22.75

If shares are Called on Sept. 20, 2002

Net Profit From Stock ($55)
Net Profit From Options and Dividends $280
Net Profit $225
Percent Return 48 Days 9.89%
Annual Percent Return 74.17

That should be an acceptable return for the risk

Thanks for the detailed worksheet, Ben, and thanks for confirming my thoughts about this trade. I do have a couple of questions, though.

Let's say, hypothetically, that QCOM is at 23 or 24 on September 20. I could, at that point, sell either the October 25, 22.5, or 20 call option (other possibilities exist, of course, but these would be the ones that I would be probably be looking at). Here is how I rate these possibilities:

1. OCT 25: Good profit potential if the stock goes up or sideways, as this would return profit both in increased stock price, and the earned premium, if the stock is assigned, and would offer the opportunity to write additional future options if the stock stays in the 23 - 24 range, without having to rebuy the stock.

Potential downside: if the stock goes down, I would miss the higher premiums offered by the 20 and 22.5 options.

2. OCT 22.5: Higher premium would be earned than the 25 (obviously), thus greater downside protection would be offered than the 25.

Potential downside: less profit would be earned if the stock did go up to 25 than selling the 25 call, and not as much downside protection is offered as with selling the 20.

3. OCT 20: The most conservative of the three choices. This would offer the highest premium of the three, and if QCOM later falls below 20, this would by far be the best choice.

Downside: Most of this premium earned on this sale would likely be given back in the likely event that the stock would be assigned (although the profit from the original trade would be locked in).

Of these three choices (should the scenario play out as described), I would probably lean toward selling the Oct 22.5 (which would still be slightly in the money), in order to increase profit potential, while still obtaining more downside risk protection.

Does this thinking have merit, or am I missing something?

Thanks,

Kendricks

Yes I think your assumptions or very valid.

I would probably go for the October 20 as my goal number 1 is not to lose money. My goal number 2 is to make money.

I don't always follow that rule, but generally and particularly in a bear market the most in the money option that will get me back to break even has been the best choice.

I bought some AIG stock in late March at $72. I have sold calls twice, once at 70 and now have sold the 60 calls. I would lose money if stock was called away, but because of bear market I am looking pretty good that calls will expire worthless or I can buy them back for less than I was paid.

I have picked up over $4.00 a share and reduced my cost to $68. Unless AIG is above say $63.80 on Aug. 16 I can buy the calls back for about what I have made and then of course sell the Sept or Oct. 65 0r 70 calls.

I have made allot of money by being out of the money during bull markets and in the money at times like we are in now.

Excellent point, Ben. With respect to the three possible choices I described, it does make sense to allow the general market trend to be a deciding factor.

QCOM is taking quite a beating today. Those in the money calls are looking better all the time!

You could do a spread on the Sept 25 and 22 1/2 calls and reduce your risk to $21.80 and reduce your profit to $70 per hundred shares.

Depends on how conservative you want to be in this market.

I did not include your transaction costs.

I still think it was a good trade (time will tell!), and don't really see the point in being that conservative. In my mind, the pertinent question is still which call options to sell in September, if the stock does not rebound.

I don't want to get so conservative that I am making it impossible for myself to make a worthwhile profit.

I sometimes just want to protect my principal if a trade goes bad.

I am not saying your trade is going south, but sometimes if I can just protect my downside and take a small profit, it is better than losing my down side protection.


Good luck.

I am leaving early today as I have an 80 year old uncle in town and I am going to do some investing with him at Del Mar this afternoon.

This guy won the Silver Star and Purple Heart during World War II and will never talk about it. Last night after a couple of scotch's he told me more than in the previous 47 years I have known him. I had to ask, he never volunteered.

Great guy and a true hero.

Wow - he must have mindblowing stories to tell. I have incredible respect for WW II combat vets. Which theater did he fight in?

He was wounded near/right on the Rhine river, I guess in either France or Germany. Toward the end of the war. He spent 18 months in an Army Hospital in England. He also was in Italy before France and Germany.

Interesting guy and loves scotch whisky.

Next time you see him, tell him Kendricks says he rocks.

QCOM and the rest of my stocks are doing great today. My 8,450 prediction is starting to look pretty good, too!

Thomas Marsico is starting back into techs. Qcom on his list.

He was one of the most sucessful money managers of the 90's. Got out of techs completely in early 2001. Has his own funds now, but use to manage the Janus Twenty Fund

Kendricks,

Looks like you are the winner since you picked twice, once at 7400 and the other guess at 8450.

What were you doing an over and under?

Nice week.

PFE, AMGN, GE, FNF, BAX, XOM etc. All did well this week, at least so far. We do have two more hours before the market closes.

I would like to see the market come down next week as I am going to have to buy back some call options next Friday on some of these stocks. First time I have had that problem in a while.

AIG was 57 on Monday and now trading at$65. Damn

Ben:

Although I don't follow all those calls and puts and whatnot, it's pretty obvious that you are buying shares, and then hedging against losses by paying a small amount for an option that can be exercized if the share price drops too much.

The problem with that approach is that broker fees and the option fees eat into any profits that you may have made if the share price rises a bit.

Better have faith in your stock picks

I guess you are right.

After all these years of doing it wrong someone that doesn't understand what I am doing explained it to me.

Gracias Exploder

Explorer, faith in stocks???? yikes.

Of course I have no faith in anything. It's a very strange concept to me.

Good week 8313 to 8745. My portfolio is back above a "magic" number. Now I'm just mildly depressed. However my fave will be happy, she gets another week of the tio Ldvee support check. I'm on the verge of cutting her off, but as I always tell her, she's a lucky whore.

Wednesday is the 14th, last day for the big boys to sign in blood. I don't think it means much tho.

Still sitting on the 40% cash position accumulated over the past couple of years due to stops. Wait a minute, I did invest 1.5% of my port in a small cap value fund this week, risk taker that I am.

Due to an extreme amount of optimism, I'm in for 8800 next week.

Ben, yes, it was a great week. QCOM is well in the money, and a couple of others I picked up recently are also in the money. My only laggard is STK, but I'll just sell some more calls when the August 15's I sold last month expire. This is a lot of fun, actually.

Explorer, there is an old saying you may wish to consider: "It is better to remain silent and be thought a fool, than to speak and remove all doubt."

Ldvee, I agree that faith, in ANYTHING, is for suckers. It amazes me people still buy into that kind of crap.

I pick 9,100 for next Friday's close. By the way, what do I win for being right this week?

KENDRICKS,

You keep ignoring the fact that you made two picks for August 9

From your August 3, 2002 post:
"I guess 7,400 for 8-9-02."

Kendricks later the same day:

"I just finished getting laid, and the world looks a little brighter than it did when I made the 7,400 prediction. I revise to 8,450 for 8-9-02. "

The fuckin rules say no changes.

Ldvee wins and I came in second and you were last.

Now if you get laid tonight and describe in detail the event, perhaps we will allow a revision in the rules and let you change the number.

Ben, you keep coming up with new rules. First the "hundred points away" rule, now the "no revisions" rule. Where can I get a complete copy of the fuckin rules you keep referring to?

That is the great thing about this game. I am able to change the rules anytime I feel like it.

Think of me as the Federal Government and you as the tax payer/citizen.

8500 on the Dow next Fridays close

I admit I have no idea where the Dow will be next Friday (I don't even know where I will be on Friday). The 'random walk' rule applies here.

At any rate, my feeling is that the rally a couple of weeks ago stopped The Big Slide, which was really getting scary. Had the slide continued, what will now be a prolonged recession could well have been a DeepRession.

I admit I have no idea either regarding next weeks Dow.

Just interesting to get the sentiment of investors.

Plus the prize for who is right the most times is a free piece of ass.

"Plus the prize for who is right the most times is a free piece of ass."

Hear that Kendricks? - if it's a free piece of Ben's ass, I'm withdrawing from the competition.

Hit the zone twice this weekend, new experience, last call at AB, 6:15 AM Sat. morning, wadda night, wow! I'm usually a late afternoon type of guy.

I need to rest.

Just to keep this thread on the front page, you guys might want to look into SURE. Price dramatically lower because of recent heavy selling due to distribution to TTN shareholders. Seems that the selling pressure is abating.

Do you own DD, you may lose everything you have and never again be able to pay for sex, yadda, yadda, yadda.