I sold my mutual fund off 2 weeks ago and now the market is making a comeback It is already October 11,1999. How long is it going to take before the market really corrects?

-- ron (rrest@hotmail.com), October 11, 1999

Answers

"Better two months early, than one day late." Joe Kennedy

-- dw (y2k@outhere.com), October 11, 1999.

Dowguru's latest charts indicate this is the big week of the crash.

http://www.dowguru.com/99crsh.htm

Will Dowguru get fame or flame?

-- Randolph (dinosaur@williams-net.com), October 11, 1999.

Hot diggity, I got in again, despite the darned Zalmoofalions or whatever they are;-)> (see earlier thread, did this forum get hacked?) I moved most of my 401K out of the market a year ago, transfering out the last of my wife's investment account tomorrow. (Hold off that crash just 24 hours, please!) Ron: don't sweat the day to day swings, especially in the relatively few companies that make up the Dow. The Dow has become an extremely artificial measurement over the past 18 months -- the rest of the market has been in bear mode for more than a year, and the Advance-Decline line is scary as h*ll these days. The bubble is close to popping -- all it needs is a single sharp needle.

-- Cash (cash@andcarry.com), October 11, 1999.

You had better be careful Cash and Carry. Talking like that might cause people to think that you believe you are the cat's butt around here. We all know that I am the cat's butt around here. You can be the assistant to the cat's butt, vice cat's butt, the cat's butt junior, or whatever but you can't be the cat's butt, because I am the cat's butt around here.

-- The Cat's Butt (Purina@kitten.chow), October 11, 1999.

You kind sir really are the cat's butt.

-- What is he talking about? (may@never.know), October 11, 1999.

If you feel that the market is do to crash as I do, short the market tomorrow by purchasing some Dow Puts. Stike price 7000 are selling right now for $35.00 per contract plus $35.00 commission. If you don't have a broker call Jerry Lamb @ 1-800-228-7058 and tell him Mike from Indiana sent you. Turn $70.00 into thousands if the dow tanks. It will.

Mike

-- flierdude (nospam@spam.spam), October 11, 1999.

Cool commercial. I'm trying to think of a cool html way to present that info.

-- the Indigenous People of Bora Bora (bora@bora.boreme), October 11, 1999.

Flierdude,

If I follow your lead, what is the risk? Can I end up paying more than $75?

Sincerely, Stan Faryna

-- Stan Faryna (faryna@groupmail.com), October 11, 1999.

Stan,

The most you can lose on an option is the amount you put into it. There is a time factor though. The December Puts expire on December 12. I have gold calls that were worth $40.00 15 days ago that are worth $1500.00 right now. If gold goes up another $40.00 they will go up an additional $3500.00 each The same can hold true for these Dow Puts if the Dow crashes.

Mike

-- flierdude (nospam@spam.spam), October 12, 1999.

Stan,

Briefly, no. When buying puts or calls, the most you can lose is the up front price (plus commission/fees).

If you want to lose more than your up front costs, you can do so by: trading in futures, writing (originating) puts or calls, shorting stocks, or buying stocks on margin.

As for the specific suggestion to buy Dow 7000 puts, and the further suggestion that it could turn $70 into thousands, well there are a couple of problems. First, options expire in specific months. Mike did not mention which month he has in mind. Two, options have a "strike price". Mike mentioned DOW 7000 which I translate to a DJX option with a strike price of 70. Such an option would expire worthless if the DOW industrials, DJIA, remain above 7000 through the expiration date of those options. In order to make "thousands" (plural) on one such put contract, the DJIA would have to drop below 5000 by the option expiration date. Not counting "volatility", that would get you $2,000 for one such put. If the DJIA stays above 7000 through that option's expiration date, that option would expire worthless.

If the stock market gets so bad that the DJIA does drop below 5000, especially if it does so very rapidly, as Mike seems to expect (based on his comments in another thread), there may be grounds for concern about what is called counterparty risk.

So, for example, since I expect the stock markets to tank, but I do not have a feel for "how much", or when, I like DJIA 9000 puts, rather than 7000, and I currently like Jan 2000 expiration. If the DJIA is still high in December, I expect I may then buy some March or April puts at whatever strike price seems like a good idea at the time. With puts, the higher the strike price, the more it costs. Also, with either kind of option, the later the expiration, the more it costs.

That's not really enough of a discussion of the subject, but it's past time for me to be snoozing.

Jerry

-- Jerry B (skeptic76@erols.com), October 12, 1999.