Ted Olshansky began his investment career in 1968 as a registered broker with Dean Witter & Co., Inc. Mr. Olshansky was a market maker and member of the Chicago Board Options Exchange (CBOE) from 1975 to...
Twas the night before Christmas,
And to investors’ great glee,
The markets were advancing,
To new high territory.
The Bears thought they had us,
They foresaw lots of trouble.
Oil, interest rate hikes,
And the great housing bubble.
Rising gold, falling dollar, Iraq and Iran,
The Bears kept on praying, as only they can.
But the Bulls continued buying, on every retreat,
And by year’s end, had the Bears right at their feet.
The Bulls looked to the economy, and what did they see?
Solid earnings, improved balance sheets, and lot of liquidity.
Moderate consumer prices and inflation in check,
And we’ll throw in a soft landing, what the heck.
The economy is strong, but expect a little slowing,
If earnings continue as expected, investors’ faces will keep glowing.
But if you do get the urge to sell, try to control that itch,
As J.P. Morgan said… “Those who bet against the U.S. economy will never get rich.”
So for 2007, we hope for a good year,
Most important, peace and lots of cheer.
And thank God we live in the greatest country in the world,
That always gives us goose bumps,
When we see our beautiful flag unfurled.
Do you have a question concerning options? Each month, Ted will address questions from the readers to provide insight and education concerning options. Being that this is the first newsletter, this month we will address the most frequently asked questions concerning the options marketplace. If you would like to “Ask Ted” submit your email to ted@myautomatedadvisor.com.
Q. When I have a spread, can I close out one side and leave the other one to run? From: Dr. Robert Kotler Encino, CA
A. A spread consists of a long option and a short option. Closing out the long option and running with the short option is considered a naked position. Margin requirements are very high when a client is naked a short put (high exposure in a falling market) and especially a short call since the amount of exposure is unlimited since in theory the stock can potentially go to infinity.
Buying to close the short side and letting the long option run has less of a margin requirement since you are limited to losing only the price of the call or put. Therefore making the margin requirement the cost of the long call or put.
Weighing both of these options is important when deciding to close out one side of a spread.
Q. Can I buy a call and short the stock? From: Sheldon Schneider, Northbrook, IL
A. Yes, your profit is when the stock declines by more that the price of the call. This assumes the call is at or near the strike price. Should the stock rise, your loss is limited to more or less what you paid for the call.
Any correspondence sent to My Automated Advisor becomes the sole property of the Company and Email replies are provided for educational purposes only.
The opinions and commentary provided by the advisors in the My Automated Advisor Newsletter are the opinion of those advisors and not of My Automated Advisor.
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