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Your assumption is only true if the position is held till expiration.
If a timed entry is used the stock could drop, the volatility rise and
a nice profit occur far before expiration. Options are a tool to
be used and not everything must wait till expiration. Ira.
<P>RAY RAFFURTY wrote:
<BLOCKQUOTE TYPE=CITE> <FONT COLOR="#000000"><FONT SIZE=-1>
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> <FONT COLOR="#000000"><FONT SIZE=-1>
Risk = Strike Price of Call + Call Price - Stock Price</FONT></FONT> <FONT COLOR="#000000"><FONT SIZE=-1>
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> <FONT COLOR="#000000"><FONT SIZE=-1>
Good luck and good trading,</FONT></FONT><FONT COLOR="#000000"><FONT SIZE=-1>
Ray Raffurty</FONT></FONT>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px"><B><FONT FACE="Arial"><FONT SIZE=-1>-----Original
Message-----</FONT></FONT></B>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>From: </B>Szilassy <szilassy@xxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>To: </B>RealTraders Discussion
Group <realtraders@xxxxxxxxxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Date: </B>Wednesday, October 14,
1998 9:41 PM</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Subject: </B>Re: AXP short - advice</FONT></FONT><FONT COLOR="#000000"><FONT SIZE=-1>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></FONT> <FONT SIZE=-1>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> <FONT SIZE=-1>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> <FONT SIZE=-1>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> <FONT SIZE=-1>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> <FONT SIZE=-1>Best
regards,</FONT> <FONT SIZE=-1>Paul Szilassy</FONT> <B><FONT FACE="Arial"><FONT SIZE=-1>-----Original
Message-----</FONT></FONT></B>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>From: </B>Earl Adamy <eadamy@xxxxxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>To: </B>RealTraders Discussion
Group <realtraders@xxxxxxxxxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Date: </B>Wednesday, October 14,
1998 1:24 PM</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Subject: </B>Re: any thoughts?</FONT></FONT>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px"><FONT COLOR="#000000"><FONT SIZE=-1>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></FONT> <FONT SIZE=-1>Earl</FONT>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px"><B><FONT FACE="Arial"><FONT SIZE=-1>-----Original
Message-----</FONT></FONT></B>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>From: </B>Ketayun <ketayun@xxxxxxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>To: </B>RealTraders Discussion
Group <realtraders@xxxxxxxxxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Date: </B>Wednesday, October 14,
1998 8:58 AM</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Subject: </B>any thoughts?</FONT></FONT>I
am stupidly short AXP at 73 3/4, any thoughts if I should abort and at
what price?
<P>TIA
<P>Ketayun</BLOCKQUOTE>
</BLOCKQUOTE>
</BLOCKQUOTE>
</BLOCKQUOTE>
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</x-html>From ???@??? Fri Oct 16 14:51:38 1998
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From: "Jack Higgins" <jfh37@xxxxxxxxxxxxxxxx>
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Subject: GEN: CycleTrader without W. Bressert?
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<DIV><FONT color=#000000 size=2>Just discovered a site called the Bressert
Electronic System Trading online trading division of PFG, Inc with
this:</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT color=#000000 size=2></FONT>
<TABLE border=1>
<TBODY>
<TR>
<TD><FONT face="Arial, Helvetica, sans-serif"><FONT
color=#000000><FONT size=-1><B>Special Note:</B>
Walter Bressert, Leon Bressert and Jerome
Bressert </FONT></FONT></FONT> a<FONT
face="Arial, Helvetica, sans-serif"><FONT color=#000000><FONT
size=-1>re<U> no longer </U>associated with the Bressert Investment
Group, LLC. or </FONT></FONT></FONT> <FONT
face="Arial, Helvetica, sans-serif"><FONT color=#000000><FONT
size=-1>Bressert Marketing Group, LLC. We <U>do not</U> <U>support,
endorse or </U></FONT></FONT></FONT> <U><FONT
face="Arial, Helvetica, sans-serif"><FONT color=#000000><FONT
size=-1>recommend products or services claimed to be associated with
the </FONT></FONT></FONT></U> <FONT
face="Arial, Helvetica, sans-serif"><FONT color=#000000><FONT
size=-1><U>Bressert name by these entities</U>.
</FONT></FONT></FONT></TD></TR></TBODY></TABLE><FONT color=#000000
size=2> </FONT></DIV>
<DIV><FONT color=#000000 size=2>According to this site Walter Bressert is no
longer supporting CycleTrader and is expanding his expertise and offerings to
traders on this new site.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT color=#000000 size=2>Also noted that the original Bressert site is
changing its name.</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT color=#000000 size=2>Anybody know what's going on and more
importantly what happens to future development of Cycletrader?</FONT></DIV>
<DIV><FONT color=#000000 size=2></FONT> </DIV>
<DIV><FONT size=2>Thanks,</FONT></DIV>
<DIV><FONT size=2>Jack</FONT></DIV>
<DIV> </DIV></BODY></HTML>
</x-html>From ???@??? Fri Oct 16 14:52:34 1998
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