Any Ideas On Put Option Plays : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Seems all indicators imply having hit trigger point (at or below support) NASDAQ seems to have been strongest. Any ideas on Put Options or even LEAPS that would provide high leverage between now and end of year...want to be completely out with cash in hand by then and go to "physicals"..trying to figure out a strategy...any ideas from the pros?

-- Larry (, September 25, 1999


97% of retail put option buyers lose. With options, you can be right on the prediction of price but you lose big due to other ill-chosen factors: time to expiration, strike price, stock volatility, etc.

Sure you can also do option spreads and make some broker and market makers happy but,

The question is: Do ya fell lucky? Well, do ya?

I suggest you read "Option Markets" by John C. Cox and Mark Rubeinstein to get a small idea of what's it all about!

-- Sandwich (anon@anon.anon), September 25, 1999.

LEAPS give you more time in the expiration game. I have accumulated Dec 2000 SPX LEAP PUTS while the market optimism was boundless. If you watch your entry point you can build a nice hedge. Look at the performance charts. Only disadvantage I see is that the bid/ask spread is large, and that you must exercise limit orders to not get caught by a low bid or high ask. This is an ideal way to "put" your money, for the same reason that you want to be OUT of stocks. I would not get discouraged by the stated statistics in the previous answer.

-- W F Ko (, September 25, 1999.

My IBM LEAPS January 2001 Put Option positions have just doubled in value. I'm watching real close now and as soon as the Market rebounds, I will cash out!

-- freddie (, September 25, 1999.

WFKO and anyone else: Well, let's say I *did* feel lucky -- middle of June and bought a mini S&P 1325 December Put (for $3,750). Finally, after last week I can probably sell this option for a very small profit -- obviously the time value is evaporating and the intrinsic value is currently about $1,850.

Should I hold this in expectation of the "big correction" before expiration -- or sell it and put it in the Prudent Bear fund where the investment philosophy matches mine (bearish) but is presumably managed by a man who knows what the hell he is doing?

I'm looking for the exit strategy. Any help?

-- DaveW (, September 25, 1999.


That's my strategy - all of my 401k with Mr. Tice.

Will cash out in December and buy more gold.

-- Andy (, September 26, 1999.

I'm no pro, but I'll toss out an idea that may be worth considering if one expects the market to tank.

The OEX Index is at roughly 670. An OEX Oct. put (expires 10/15) with a strike price of 600 sells right now for about 2 (i.e., $200). If the index fell to 500 by 10/15 (a drop of about 25%), that put would be worth $10,000.

Of course, if one bought a put as I've described, and the OEX fell enough to yield a nice profit but not a windfall, there'd be the inevitable dilemma concerning whether to sell at that point. The importance of defining one's goals and the strategy for carrying them out, before getting involved, cannot be emphasized too strongly.

-- David L (, September 26, 1999.

Andy, you have posted a lot of great links (e-gold, gold-eagle, etc.) that have really been beneficial to me over the months -- Thanks! I enjoy your *tinfoil* commentary too -- probably because I agree with most of it!

Having said that, please give me your guess for the DOW low between now and Thanksgiving, and the current month gold high between now and June 2000 (yeah, I bought a 300 GC call too).

I'm still well within the 95% I'm afraid!

-- DaveW (, September 26, 1999.


How about shorting SPDR's or QQQ's? There would be less margin available but you don't have to worry about the time premium problem. In both cases you short at FMV of the underlying index, with no premium. It's frustrating to buy puts, be right and still lose money because of the premium-I've been there!

You might also be interested in some of the Rydex funds, which short the indexes with leverage.

-- mike (, September 26, 1999.


I saw this on another forum and I pretty much go along with it...

"Anyone out there believe that Y2K will drop the DOW down to the 4- 6000 level. I do and I bet we see American investors fly into metals like never before. I also believe that Y2K will be used by the elite to capitolize on a redistribution of wealth and power. I see a 1 week to 1 month period of power and communictions breakdown that will a allow a plan to reditribute wealth be inacted. The equity markets have been played out and the metals market will be the next game. I predict hugh swings in both equities and metals over the next 3 months. When the DOW breaks below 8500 people will start into metals which I predict by that time will have driven gold past 300. This could happen by October 31. November will have all currencies showng extreme weakness driving gold prices higher and the DOW lower.



10-31 = AU 300 DOW 8500

11-30 = AU 380 DOW 6000

December Ranges AU 350 - 800 DOW 4000-6500


I have put my money where my mouth is.

Oh YEA how about NASDAQ 900 by years end!

15% stocks - lots of DROOY

25% gold bullion

30% silver bullion

30% cash

If I am wrong, oh well its only money.


Good luck Dave!!!

-- Andy (, September 26, 1999.

Andy, Are you talking about Tice with Pru Bear Fund?? Are you in Dallas Too? Have you mread Batra's latest book/ Your thoughts...

Thanks, Larry

-- Larry (, September 26, 1999.

"It's frustrating to be right and still lose" Mike, my thoughts exactly, a situation I would really like to avoid (this time). With the exception of what I believe to be "Fair Market Value", what are the other initials?

-- DaveW (, September 26, 1999.

Well let's see, Andy, that's a little better than 40% drop in the DOW by the end of November. Assuming a comparable reaction in the S&P + the move in metals ... yeah, that would move me solidly into the "win" catagory. And very good luck to you as well !!

-- DaveW (, September 26, 1999.


These are traded on the AMEX as if they were stocks. SPDR'S own the S&P 500 and QQQ's own the NASDAQ 100. These 2 are usually the AMEX volume leaders each day. In addition you can use DIA's, which also trades on the AMEX and which owns the Dow 30 Industrials. All 3 of these can be bought, sold or shorted under the usual exchange margin rules any time during the trading day, just like any stock. They are each highly liquid proxies for the index they represent.

-- mike (, September 26, 1999.

Andy-i have considered investing in Prudent Bear Fund, but what assurances do you have of it's y2k compliance. if banks, brokerage houses, etc. are a big ???, how can you be assured that Prudent Bear Fund won't have lost data and possibly lose track of your money? thanks for your help-dory

-- dory (, September 26, 1999.

Do not trade options until:

You know who Black & Scholes are, and where to find them.

You know the current VIX and its recent trend.

You know how much volatility you wish to buy.

You consider exchange default risk and counterparty default.

You have gotten "physical" in every essential you need for 2000.

-- jor-el (jor-el@krypton.uni), September 26, 1999.

Larry and Dory,

yes David Tice is with

there y2k compliance statement is not very reassuring - it just says they are relient on third party s/w vendors blah blah blah!

no guarantees!

I plan on getting out in December anyway, and even that may be getting too late!

-- Andy (, September 26, 1999.

To Andy and jor-el, and anyone else that's interested --- It's late Saturday night,(2:41am) but I'd like to give you my thoughts. I've been studying and trading commodities for 4 years, and started with options. I would be happy to explain what I know about them,i.e. the expressed concerns about time decay or the "value" of the option even though you were right about the market move etc., but I don't want to clutter this thread. So, contact me if you want that detailed.

In general, the bet is simple. It is this: Y2K, (or any other factor you consider valid), is going to cause the "market" to go down, by about 50%, in the next 6 months.

What OPTION can I buy based on how much I have to spend?

The S&P 500 Option market is very liquid, with little difference between buy and ask, and with one of the Clearing Members as your Broker, is as secure as you can get. (i.e., the best chance of getting your money back and hopefully, profit! I feel they are more secure than Stock Brokeridge Houses because they have to have a minimum amount of cash in a bank to offset any people who can't anny(SP?) up.)

To "penny pench", on what you are saying will be the biggest move in your lifetime is silly, since the act of getting the money out of the market and into your hands in a form that will benefit you is questionable - i.e. will there be banks by the time you have decided to get out? -etc., etc, ---

What little you save in purchasing an OPTION for a few hundred $'s less, will be tremendously offset by the gain you will make if you are right about your view of the Market. Don't miss the move!

There probably isn't enough time to teach someone the finer point of OPTIONS, so, just get one. For about $3,000 you can get a MARCH S&P 950 Put Option. If in 3 months, the S&P is at 900, the option will be worth about $23,000.00

But, I agree that you should first have your PREPS IN PLACE!

I believe I dis tha math correctly on the option value, but it is late. By the way, I have one of these now.

-- Gregg (, September 26, 1999.

I continue to maintain that there are NO SAFE BETS for investing based upon Y2K. I can assure you that should the global economic system melt down, there will be no safe harbors.

That being said, I'm currently long cash and lead.

-- Gordon (, September 26, 1999.

Gordon wrote: "I continue to maintain that there are NO SAFE BETS for investing based upon Y2K. I can assure you that should the global economic system melt down, there will be no safe harbors."

I'll second that motion. :-)

Even those who expect seriously adverse international economic effects from Y2K cannot know in advance just how severe they will be, or just when they will be completely apparent.

So, I daresay, spread your "bets" around. I consider PUTs to be one approach to consider, but with this caveat: they may appreciate greatly, or they may drop to zero.

I've placed about 10% of my liquid assets in PUTs and am prepared to lose it all. If the DJIA drops another 20% this year, and if trading keeps functioning, these PUTs will be worth more than the rest of my liquid assets. If the DJIA drops only a few more per cent this year, these PUTs will be worth nothing! In the latter case, I plan to place a comparable amount on March or April 2000 PUTs probably during December.

Bottom line: whatever your guess is, it may be wrong. :-)


-- Jerry B (, September 26, 1999.


there are no "pros" to guide you through what is beginning to unfold. go to cash now. sit on it till 2nd quarter of next year. you'll have plenty of opportunity to make money later. to gamble now is a sucker's bet.

-- corrine l (, September 26, 1999.

Gordo, R U serious? You're long lead?

-- Downstreamer (, September 27, 1999.

Probably a lot of us are "long" lead. Fabricated into generally cylindrical shapes with one round or pointed end.

-- A (, September 28, 1999.

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