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Jim
Suffer me for a moment since I'm new at this options stuff. If WCOM does
go to 38 in the next few weeks then yes the Dec 40 put will double, but
the Dec 47.50 will go from 4.250 bid to about 15 to 16 in the same time
frame. And since it has a delta near .45 it has a much better chance of
making money IMHO. Granted your exposure is less with an OTM put but
your chances of making money seem to be less also. That doesn't mean you
won't make a ton, just that it seems to me the probability is less.
If you're really up for indigestion how about selling the Sep. 47.50
calls for the same premium you're buying the Dec 40 puts?
John Manasco
Jim Greening wrote:
>
> I don't intend to hold this position
> very long, but also don't want to lose a lot of time value each day so
> I compromised and looked at the December put options. Since I'm
> expecting a sharp drop to under 40, I decided on the Out of The Money
> (OTM) Dec 40 Put options ( LDQXH - Bid 1.375, asked 1.625). Going
> this far OTM gives me much greater leverage at increased risk.
> However, the amount at risk for 1000 shares is small compared to the
> amount at risk shorting the same number of shares and the reward for a
> large move is essentially the same. The problems come if we don't get
> the large move <G>.
>
> Jim
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