[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

RE: Leaps vs Equity



PureBytes Links

Trading Reference Links

Thanks for the tip. If I may ask, what is the software you are using ?

I remember back in Win 3.11 days there were a couple of vendors selling
option valuation software.
One was from Ken Triester and I don't remember the other one (i.e. something
with a lizard name).
I found them to be of limited value. Optionscope from MS is not that helpful
when compared to those other two programs.

Thanks,
Marshall M. Liu
Senior Financial Analyst - Investment Management
Office: (213) 922-4285
Fax #: (213) 922-4027
Email: lium@xxxxxxx


-----Original Message-----
From: Wong [mailto:whs@xxxxxxxxxxxx]
Sent: Tuesday, November 07, 2000 5:06 PM
To: metastock@xxxxxxxxxxxxx; 'metastock@xxxxxxxxxxxxx'
Subject: Re: Leaps vs Equity


Hi Marshall:

Since Guy is very good on the technical side, he's better qualified to talk
about how probable the stocks will eventually go up, and by how much.


Since I trade calls/leaps most of the time, I'll relate my experience here.


Buying calls/leaps in the hope of making money is EXTREMELY RISKY.  You may
have heard or read that so-and-so made tons of money buying calls/leaps.
Very true.  But on the other hand, one can easily lose every cent he/she
invests in calls/leaps.

Leaps is actually a long-term option (both call and put) which lasts for 1
to 2 1/2 years.  (Normal options last for about 6 months.)  The advantage
of leaps is it can act is a proxy of the stock itself, for the duration of
its life before expiry.  If you're wrong, there's still a fighting chance
that the stock may eventually go up and hopefully you can get out with a
slight loss, or breakeven, or even make money.


For the amount of money invested, if the market is freindly (=bullish), if
you have chosen the right stock (with sound fundamentals), if your market
timing is good or if you've bought at almost the bottom, chances are you
can make 2 to 10 times profit on the calls/leaps.  On the other hand, if
you invest just in the stock itself, given the same conditions, your profit
would be much less than what you can make re options.  (I think in general,
a 10% increase in stock = a 25% to 50% increase in the options.  Of course
the reverse, i.e., downside, is also true.)


On the other hand, since I'm always bullish (but unfortunately the stock
market is not), and my timing technique is not very good, very often I end
up losing all the money I invest in the calls/options.  With good stocks,
unless the company eventually goes bankrupt, you would still have some
money left in your account, and hopefully in the next 3 to 5 years, the
stock may go back up.  But the longest life of a leaps is only 2 1/2
years...


I end this message by repeating what I said earlier:

Trading options is very risky.  You may lose 100% of what you put in...
It's certainly NOT for everyone.


Regards,

Wong
=============================

At 04:01 PM 11/7/00 -0800, Liu, Marshall wrote:
>
>Given that T, and WCOM have decided to create & distribute tracking stocks
>down the road, 
>which strategy (i.e. buy equity or buy leaps) is preferred ? What are the
>advantages/disadvantages of each ?
>
>Thanks in advance.
>
>Marshall M. Liu
>
>
>-----Original Message-----
>From: Wong [mailto:whs@xxxxxxxxxxxx]
>Sent: Tuesday, November 07, 2000 2:06 PM
>To: metastock@xxxxxxxxxxxxx; Metastock User Group
>Subject: Re: New positions
>
>
>Hi Guy:
>
>Thanks for your various posts.
>
>Since you're buying some of the stocks - T, Fon and Wcom for long term
>basis (next 2-3 years), have you considered buying some Jan2003 leaps?  (By
>July or so next year, you can buy Jan2004 leaps.)
>
>
>Right now I'm looking at buying some Jan2003 leaps on T.
>
>You can get quotes on options including leaps at the Dreyfus website:
>http://www.edreyfus.com/cgi-bin/dbsclient?TYPE=F3&TAG=01QUOTEquote