Re: [CANSLIM] Options

From: "Dan Forant" <dforant1@nycap.rr.com>
Subject: Re: [CANSLIM] Options
Date: Fri, 22 Aug 2003 12:03:55 -0400
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If I ever bought 30 contracts I'd faint...........................being
conservative that is.

DanF

- ----- Original Message ----- 
From: "DMC197807" <dmc197807@comcast.net>
To: <canslim@lists.xmission.com>
Sent: Friday, August 22, 2003 9:15 AM
Subject: Re: [CANSLIM] Options


> Dan,
>
> "Not exactly exorbitant."
>
> It all depends on how you look at the options, which is why I always try
to
> use a notional value of capital rather than the option cost of capital
when
> I trade options.  To clarify, using my example of LF, if you use the
normal
> cost of capital ideas, and you buy 30 contracts, you pay   $5,307.50
($5,250
> for the options plus $57.50 in commissions).  Just to exit the contract,
> without any price move at all, costs you $357.50, or 6.7%.  Put another
way,
> as soon as you put on the trade, you are down 6.7%.
>
> If the stock moves against you as per my example, say a -$5 move, your
> options are worth 15 cents and you exit, with net   $392.50 ($450 minus
> $57.50), for a whopping 93% loss.  If the stock goes up $5, then you exit
> with $13,085 pure gain, or 246%.
>
> In any event, I have to run to the airport this morning, but if you rerun
> these numbers thinking about the nominal amount of stock you control, and
> your gains in those situations, then it achieves more reality.  The 93%
loss
> ($4,915) becomes more reasonable measured against the 105,000 worth of
stock
> the position controls.  The $13K gain as well becomes a more reasonable
> 12.4% gain on the position, while the loss limitations are very
comfortable
> (as well as the real cost of capital).  The mistake most people make is to
> congratulate themselves on the 246% gains while forgetting the options
that
> expire worthless.
>
> DMC
>
>
>
>
> ----- Original Message -----
> From: "Dan Forant" <dforant1@nycap.rr.com>
> To: <canslim@lists.xmission.com>
> Sent: Friday, August 22, 2003 4:24 AM
> Subject: Re: [CANSLIM] Options
>
>
> > Limiting losses to 8% with options is cutting it too thin. 25% is more
> like
> > it. Won has good advice for options. I'm not advocating using options in
> > general, just when certain conditions develop. Ameritrade's options fees
> are
> > around 12.50 + 1.50 per for additional contracts. Not exactly
exorbitant.
> >
> > DanF
> >
> > ----- Original Message -----
> > From: "DMC197807" <dmc197807@comcast.net>
> > To: <canslim@lists.xmission.com>
> > Sent: Thursday, August 21, 2003 10:04 PM
> > Subject: [CANSLIM] Options
> >
> >
> > > Dan,
> > >
> > > The one problem with options is it is very hard to limit yourself to
an
> 8%
> > > loss, and the timeframe is a question.
> > >
> > > Just for example, let's assume you were fascinated with LF and decided
> to
> > > buy options.
> > >
> > > Would you buy Sept or Oct.?? If you were confident of the breakout you
> > might
> > > choose Sept at the money calls, the 35s are on sale for 1.65 X 1.75.
> > >
> > > If it broke up to 40, they'd be worth $6 in a hurry.  Nice.
> > >
> > > But if it dropped back down to 30 they'd be worth 15 cents.  Maybe.
Add
> > in
> > > the expensive commissions and you can see where things go.
> > >
> > > You'd have to deal with these things in more of a "nominal amount"
> > analysis
> > > to make any sense of it and just assume that $1.75 total loss is not
> 100%
> > > loss, but rather a 5% loss on the nominal $35 value of the stock.
Since
> > you
> > > are risking 1.75 to make $6, that's not a bad thing to do, and it
takes
> a
> > > lot less capital.
> > >
> > > For me, I'd want to know much more about the likelihood / frequency of
> > > failed breakouts which would give you a better idea of whether or not
> > > expensive options are a viable way to play CANSLIM.
> > >
> > > As to buying cheap options, there's a lot of literature and learning
on
> > that
> > > subject which is more than this thread probably wants to delve into.
> > > Suffice it to say SFO magazine has a lot of good articles on the
subject
> > and
> > > there are a slew of options sites (cboe.com, optionvue, schaeffer's,
> etc.)
> > >
> > > DMC
> > >
> > >
> > > ----- Original Message -----
> > > From: "Dan Forant" <dforant1@nycap.rr.com>
> > > To: <canslim@lists.xmission.com>
> > > Sent: Thursday, August 21, 2003 3:53 PM
> > > Subject: Re: [CANSLIM] Intro: David Pinhasik
> > >
> > >
> > > > What about options?? Buy an in the money call breakout time for a
mere
> > > > fraction of what 100 shares would run,.
> > > >
> > > > DanF
> > > >
> > > > ----- Original Message -----
> > > > From: "Ian" <ianstm@shaw.ca>
> > > > To: <canslim@lists.xmission.com>
> > > > Sent: Thursday, August 21, 2003 2:32 PM
> > > > Subject: Re: [CANSLIM] Intro: David Pinhasik
> > > >
> > > >
> > > > > Hi David:
> > > > >
> > > > > I am the minority view, and some would say it is NOT CANSLIM at
all,
> > but
> > > > > with just $1000, I would consider some sub $5 nancaps with CANSLIM
> > > > > fundamentals, growth, low P/E, a strong outlook, and a strong
chart.
> > All
> > > > > these things are the same thing you look for in $15+ CANSLIM
stocks,
> > but
> > > > > they apply to the nanocaps as well.
> > > > >
> > > > > IMHO, your odds on the nanocaps are better (more winners, less
> > > reversals)
> > > > > because of the lower relative valuation, and the fact that 'value'
> > > > investors
> > > > > come in as well. But for most people, and almost all institutions,
> the
> > > > > absolute dollar value of potential gains is too small to consider
> > them.
> > > > But
> > > > > with $1000, they are very attractive.
> > > > >
> > > > > Some recent examples - to see what kind of thing I am talking
about,
> > > (not
> > > > > buy recommendations here, my strategy on these kind of things at
> this
> > > > point
> > > > > is to wait for a pullback to the 13-day ema):
> > > > >
> > > > > OMNI
> > > > > MILT
> > > > > HSR
> > > > >
> > > > > The important thing to note in the charts of all 3 is the
'relative'
> > > > > increase in volume in the last week or two. Even though the volume
> is
> > > > still
> > > > > very small, they have all seen a quantum jump in daily volume.
> > > > >
> > > > > The best place to find these, in my experience, is in the
"earnings"
> > > > section
> > > > > of IBD.
> > > > >
> > > > > Cheers,
> > > > >
> > > > > Ian
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > ----- Original Message -----
> > > > > From: "The Pinhasiks" <pinhasik@012.net.il>
> > > > > To: <canslim@lists.xmission.com>
> > > > > Sent: Thursday, August 21, 2003 8:26 AM
> > > > > Subject: [CANSLIM] Intro: David Pinhasik
> > > > >
> > > > >
> > > > > > Hi,
> > > > > >
> > > > > > I am a computer programmer working for IBM Global Services.
Before
> > the
> > > > > > market went South, I was active lurker (read Tom's posts very
> > > carefully)
> > > > > and
> > > > > > made 100% in 5 short weeks, and since then have been in cash
most
> > of
> > > > the
> > > > > > time except for a few dismal attempts to reenter the market,
> always
> > > > > followed
> > > > > > by a failure. Now, it seems like it may be the time to try
again,
> > > albeit
> > > > > > carefully. My problem is that <blush> I have less than a $1,000
to
> > > play
> > > > > > with. Could anyone offer a way to screen CS stocks without
paying
> a
> > > > > fortune?
> > > > > > I used to use Tom's Weekly Weeview as a starting point for my
> > > research,
> > > > > but
> > > > > > now I'm clueless. Any suggestions will be happily accepted.
> > > > > >
> > > > > > Thanks,
> > > > > > David
> > > > > >
> > > > > >
> > > > > > -
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