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Dan,
The call on the DJIA, NDX, and OEX was based upon the flow of money into
each of the indexes (see my email of 10/25). Yes, the DJIA is overbought
when compared to the NDX, but stocks can get more over-bought and more
over-sold. I'm not an options player but as an experiment I'll recommend
the following trade and see what happens:
Buy 10 DJX Nov 104 (equivalent to djia of 10400. DJIA closed @ 10835.77)
Calls. See:
DJV KZ-E (2000 Nov 104 Call) 5 1/8 +1 1/8
Sell 10 OEX Nov 760 Call (OEX closed at 732.77). See:
OEZ KL-E (2000 Nov 760 Call) 6 1/4 +1/4
Put $1,020 in your pocket ($1,125 difference less commission of $105) for
three weeks wait.
If the market stays here the OEX calls expire worthless and you can cash the
Dow calls in for another $4325.20 (Calls have an intrinsic value of
$4,357.70 less commission of $52.50) in your pocket for a total profit of
$5,345.20 for 3 weeks wait.
Market crashes, you keep the $1,020 difference.
Market goes up, close out positions if OEX goes above 750
Pete
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