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<DIV><FONT color=#000000
size=2> <FONT
color=#000000>Your suggestion about purchasing a call is excellent. Any
time you short a stock with options you can limit your up side risk with a
call(s). The formula for calculating the maximum risk
is:</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT color=#000000></FONT></FONT> </DIV>
<DIV><FONT color=#000000 size=2><FONT
color=#000000>
Risk = Strike Price of Call + Call Price - Stock Price</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT color=#000000></FONT></FONT> </DIV>
<DIV><FONT color=#000000
size=2> <FONT
color=#000000>Naturally your hedge (called a protected short sale or synthetic
put) would not be profitable until the stock declined more than the price of the
call, but this seams a reasonable price to pay to get limited risk with
unlimited profit on the down side. I would suggest anyone going short
should scan for BOTH appropriate stocks (or futures) AND reasonably priced at
the money or just out of the money calls.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT color=#000000></FONT></FONT> </DIV>
<DIV><FONT color=#000000
size=2>
Good luck and good trading,</FONT></DIV>
<DIV><FONT color=#000000
size=2>
Ray Raffurty</FONT></DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px">
<DIV><FONT face=Arial size=2><B>-----Original Message-----</B><BR><B>From:
</B>Szilassy <<A
href="mailto:szilassy@xxxxxxx";>szilassy@xxxxxxx</A>><BR><B>To:
</B>RealTraders Discussion Group <<A
href="mailto:realtraders@xxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxx</A>><BR><B>Date:
</B>Wednesday, October 14, 1998 9:41 PM<BR><B>Subject: </B>Re: AXP short -
advice<BR><BR></DIV></FONT>
<DIV><FONT color=#000000 size=2>Ketayun, I agree with Earl. Sounds
like you lack any form of serious risk management strategy, which will kill
you quicker than you can say "John Jacob
Jingelheimerschmidt".</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT size=2>My personal suggestion based on my experience is to take
time off to review your situation in some detail. Read as much as you
can on the subject of risk management but despite all that's been written on
the subject, it boils down to this - no trade should be made without a known
target upside and stop-loss level BEFORE initial order entry. You must
know how much of a loss your trading account can withstand on any one trade
and, based on recent support/resistance and any number of your chosen
technical indicators, to what level the price can REASONABLY be expected to
ascend. Stick to these religiously. From a psychological
standpoint a big loss is devastating, while many small ones are
manageable. Also, you clearly need a detailed business plan for
trading - this should include what average upside and downside you strive
for - and keep a detailed journal of your trades, reasons for entry and
exit, lessons learned, etc. This investment in time is the only means
for your efforts to bear fruit.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>I know this because I made a similar mistake and am
currently long XCIT from 42. The profit opportunities which have
evaporated as I held the position have been staggering - even in XCIT
itself! Misery does not love company in this case though - I am taking
steps to make sure this experience is not repeated. I have taken a
respite from watching the quote screen this week and am spending nearly all
my time at the local library, poring over all my materials and thinking
through my strategic direction. My confidence level has made
consistent progress as my knowledge base expands and my system evolves in
breadth and depth.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>So Ketayun, as far as your specific AXP position, only you
can decide if you are willing to assume additional risk. Aside from
waiting or closing the position now there is of course a third option you
may not have considered - hedging. Among others, you can buy a call
with your desired expiration date and a strike price at a level slightly
above the existing price. Your loss is then limited to the difference
between your entry price and the option's exercise price. If the price
goes your way, the option will expire worthless and you can cover on more
favorable terms. If it doesn't, you have set a predetermined downside
risk rather than leaving your situation up to chance.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Such lessons are always costly at the outset, but it's a
part of tuition. You can either continue to pay with your own money OR
you can hit the books, fill a notebook or two, and define your strategy
precisely - the choice is yours.</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Best regards,</FONT></DIV>
<DIV><FONT size=2></FONT> </DIV>
<DIV><FONT size=2>Paul Szilassy</FONT></DIV>
<DIV><FONT size=2></FONT><FONT face=Arial size=2><B></B></FONT> </DIV>
<DIV><FONT face=Arial size=2><B>-----Original Message-----</B><BR><B>From:
</B>Earl Adamy <<A
href="mailto:eadamy@xxxxxxxxxx";>eadamy@xxxxxxxxxx</A>><BR><B>To:
</B>RealTraders Discussion Group <<A
href="mailto:realtraders@xxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxx</A>><BR><B>Date:
</B>Wednesday, October 14, 1998 1:24 PM<BR><B>Subject: </B>Re: any
thoughts?<BR><BR></DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px"></FONT>
<DIV><FONT color=#000000 size=2>I suggest that if you didn't go into the
trade with both a stop loss point and a minimum profit objective, that
you should not be in the trade. Those decisions should never been made
while in a losing trade - might be a good idea to get out and figure out
what your objectives are.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT size=2>Earl</FONT></DIV>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px">
<DIV><FONT face=Arial size=2><B>-----Original
Message-----</B><BR><B>From: </B>Ketayun <<A
href="mailto:ketayun@xxxxxxxxxxx";>ketayun@xxxxxxxxxxx</A>><BR><B>To:
</B>RealTraders Discussion Group <<A
href="mailto:realtraders@xxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxx</A>><BR><B>Date:
</B>Wednesday, October 14, 1998 8:58 AM<BR><B>Subject: </B>any
thoughts?<BR><BR></DIV></FONT>I am stupidly short AXP at 73 3/4, any
thoughts if I should abort and at what price?
<P>TIA
<P>Ketayun </P></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
</x-html>From ???@??? Thu Oct 15 19:36:23 1998
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Date: Thu, 15 Oct 1998 22:09:32 -0400
Reply-To: "RAY RAFFURTY" <rraff@xxxxxxxxxxx>
Sender: owner-realtraders@xxxxxxxxxxxxxx
From: "RAY RAFFURTY" <rraff@xxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: [Doom and Gloom Dow Industrials Forecast]
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Hi Steve,
I agree, but think about it... THE ULTIMATE INSIDER TRADE...
quietly buy S&P futures... then on a slow Thursday afternoon LOWER INTEREST
RATES!!!!!!!! Economy heating up? No problem just do the opposite. They
could solve the national debt in only a few trades. But what about the
small investor, you ask? No problem for $2400/year they could send a weekly
newsletter with daily Internet updates. {;-)
Good luck and good trading,
Ray Raffurty
-----Original Message-----
From: steven poser <swp@xxxxxxxxxx>
To: RAY RAFFURTY <rraff@xxxxxxxxxxx>
Cc: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Thursday, October 15, 1998 9:44 PM
Subject: Re: [Doom and Gloom Dow Industrials Forecast]
>The Fed proved my point. All I was saying is that they will cut rates if
>they think they have to, not buy stock futures!!
>
>Steve
>
>RAY RAFFURTY wrote:
>>
>> -----Original Message-----
>> From: steven poser <swp@xxxxxxxxxx>
>> To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>> Date: Wednesday, October 14, 1998 9:24 PM
>> Subject: Re: [Doom and Gloom Dow Industrials Forecast]
>>
>> >TQuinn211@xxxxxxx wrote:
>> >This makes no sense. If the Fed was that worried about the markets
>> >(which I think they should be) they would have at least cut the discount
>> >rate on 29-Feb. Interventions do not work unless they are done big time.
>> >Witness the sad history of central bank intervention in the forex
>> >market. All it does is clobber the shorts and give those who were not
>> >short an opportunity to short at a better level. If the Fed wants to
>> >prop up the market, all they need to do is say that they are looking
>> >into LEGAL ways of buying stocks. That'd scare the heck out of anybody
>> >shorting the market.
>> >
>> >Caroline Baum just wrote a great piece for Bloomberg News talking about
>> >similarly idiotic conspiracy theories that always crop up in the forex
>> >market and bond pits, the latest of which called for a rate cut over the
>> >weekend following an emergency meeting last week of the Fed.
>> >
>> >Watch out for the little green men. If they start buying spooz,
>> >Andromeda's the limit!
>>
>> I guess the Fed members wanted to play golf this weekend and got
the
>> rate cut out of the way early {;-) Seriously, if someone is short bond
>> futures, how bad will they be hurt by this move? Does anybody think the
>> timing was deliberate, similar to the way Ruben nailed currency
speculators
>> a few months ago?
>>
>> Good luck and good trading,
>> Ray Raffurty
>>
>> P.S. What's the exchange rate on the Andromidian {IYB)YV%R&^ to US$
>
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