Sunday, August 28, 2005

I took a break from worrying about my house sale to have some fun with numbers this weekend. I’ve been tinkering with a new technical model I conjured up that has back-tested quite well. I’m using long option positions to limit capital exposure. Here’s what the model came up with for Monday morning:

- Buy 1 Jan 06 IBM 80 Put @ $3.10
- Buy 1 Feb 06 GAP 25 Call @ $4.50
- Buy 1 Jan 06 CIN 40 Call @ $4.60
- Buy 1 Mar 06 XLU 32 Call @ $1.55

No, this is not a recommendation to take positions in these options, so please don’t go and do something stupid. Like I said, I’m tinkering here. For all I know, the model is worthless.

2 Comments:

At 8/29/2005 8:05 AM, Blogger Eddie said...

I don't mess with puts and calls. I understand that they can provide a hedge against risk that doesn't involv stocks, but I guess I never took the time to learn about them. Good luck.

 
At 8/29/2005 10:01 AM, Blogger Ace said...

Hedging is a common use for options derivatives, but they are a decent speculative vehicle as well, especially when you want to limit your capital exposure.

 

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