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On Dec 28, 4:41pm, Mark Brown wrote:
> Subject: [RT] BUY the Y2K
> Hello RealTradersList,
>
> I want to get long the SP here going into Y2K, so soon this week I
> am going to get long the SP prior to Y2K thinking that the non event
> will cause a run strait up afterward.
>[...]
>
> I generally hate to buy calls or puts and in my entire career Ii
> have never bought a call or put of any kind on any commodity. I have
> chosen only to sell them, but I may give it a shot this time.
>
> I may just say screw it no guts no glory and just buy the SP
> futures and be done with it. Preparing myself for a 13+ percent
> stop loss I would be willing to take. Which would be around the mid
> 1200 level.
Looking at OEX options. A straight at-the-money call is trading with a
roughly 22% implied, and would cost you about 2.5% of cash (ie,
breakeven is +2.5% move if held until Jan. expiration). Seems to me
that a 2.5% hit would be a lot easier to take than a 13% loss, if
you're estimating that as the maximum downside. If I read the quotes
correctly, the a-t-m puts are trading at a similar implied to the
calls. The a-t-m straddle can be had for about 5% of the underlying.
If you think we'll see a greater than +/-5% move in the first 3 weeks
of Jan. then the outright straddle looks pretty good. (The odds of a
+/-5% move are probably 1 in 10, but Y2K could definitely be one of
those volatile periods where the market moves outside all historic
norms).
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