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Forum Newbie
Group: Forum Members
Last Login: Monday, December 31, 2007 6:35 PM
Posts: 1,
Visits: 2
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Asif,
I've been reading your newsletters for quite awhile. I noticed in the past year, though, that you tended to utilize options and puts much more than previously. In the economic climate, obviously, it was much more cost-efficent to buy puts than to short any stocks out there.
In general though, what are your views on derivatives? Before reading your reasoning behind your puts on home builders and lenders, the only exposure I had to them was through the Black-Scholes pricing formulas.
Could you elaborate in a broad sense how you approach using these derivatives?
Thanks and keep it up!
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Forum Member
Group: Administrators
Last Login: Sunday, January 27, 2008 10:37 PM
Posts: 32,
Visits: 164
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| 2007 was an interesting year that I started with an overall negative view of the market but with the realization that markets rarely react the way you expect them to and there are always opportunies. Derivatives to me are a tool that can be utilized to maximize returns (naked puts/calls), manage risk (covered puts) or to earn income (writing puts/calls). In most cases I prefer them to actually shorting a stock because I know the extent of the loss I can incur. The hardest part about them for me is the time decay or the theta of options. Strangling Apple proved to be an interesting experience and a good lesson. I approach derivatives as a tool to hedge my portfolio and tend to keep position sizes small. Despite the focus on options, I actually added 14 new long positions through the course of the year and one short position. Thank you for taking the time to read my newsletters.
--If the doors of perception were cleansed everything would appear to man as it is, infinite. — William Blake.
Yes, I am blogging @ http://www.sinletter.com/ablog.aspx
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