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   Strategies & Market TrendsDJX (Dow Jones Ind. Avg. options)

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To: giddy guru who wrote (9)10/27/1997 2:28:00 PM
From: Zardoz
   of 33
 
Here's a question:

Anyone think that there's a connection between the market dive and the issue of Dow options. {Sure seems like a great way to sell stocks and buy options/futures, and not risk yourself to the equity}

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To: giddy guru who wrote ()1/2/1998 8:51:00 AM
From: david siple
   of 33
 
HI everyone,
Along w/ the New Year, comes thoughts of "where's the Dow headed?"
Has anyone traded DJX? Did you hold PUTS and CALLS together? Or just one or another as a hedge against your portfollio?
Any info on Strategy or Pointers that may have Worked out for you, or not, would be appreciated.
Thanks,
-ds

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To: david siple who wrote (11)2/24/1998 8:35:00 AM
From: MJR
   of 33
 
Hello:

I haven't seen any contributions here for quite some time. Is everyone not trading lately or just no talk? I'd like to see this thread get going again as I'm about to embark on trading options on the dow and could use all the help available.

Regards,
Mike

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To: MJR who wrote (12)2/24/1998 8:41:00 AM
From: david siple
   of 33
 
hi there. I am holding on to my december 7600's. At an average price of about $3.70. Not so much thar i feel like a bear, but because before then I believe we will have a few huge drops in the market: whether 's the 2nd , 3rd q's showing REAL Side effects; gulf war; bad sentiment; terrorism; etc.
I call it insurance.
Most of my holdings are long.
What are you thinking of? puts or calls on the djx?
--ds

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To: david siple who wrote (13)2/24/1998 10:50:00 AM
From: MJR
   of 33
 
David:
Your longterm feeling that there will be at least one "big" drop in the dow this year makes sense and I'm quite sure you'll make a buck or two on that one. Shouldn't be that far out either.. although not as bad as the last one, I think this coming earnings round will have it's share of warnings to shake things up a bit.

My style of trading DJX options is fairly short term .. I tend to move in and out with the day-to day trend movements, but certainly not the hour to hour moves.. that's way too much energy needed.

I'm now watching DJX for a firm reversal. The charts (60-day) show a strong over-bought condition that is due to pull back soon. A bit of a hint to this was seen yesterday.. and today we're done 48 points now and falling intraday. If we drop below 8300 on the close that should be my "Buy Puts" indicator.. looking at March Puts now.

Oh well, back to work, and back to watching the Dow..

Good Luck,

Mike

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To: MJR who wrote (14)2/24/1998 2:36:00 PM
From: david siple
   of 33
 
Mike,
when I first "looked into" DJX's, I had planned on going about it like you: basically, holding on for several days or a week. But, after watching it a bit, it occurred to me that there was no way I was going to make money that way unless we had severe swings (taking into acct. bid/ask also). Am I missing something or are you putting down LOTS of money on these trades to overcome what I am up against. I.E. I am looking at dropping a thousand bucks on "sev. days" trading and a small percentage on my down the line trading (the insurance.)
--ds

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To: david siple who wrote (15)2/24/1998 5:13:00 PM
From: MJR
   of 33
 
You are correct.. the bid/ask will kill you unless there is a large move in the dow.. I generally load up with 20-40 contracts, so not all that large.. but large enough to overcome some of the difference. Because of this I look for indicators that point to a 4+ day trend.. very short term trends tend not to be enough.

Mike

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To: david siple who wrote (13)2/26/1998 12:59:00 AM
From: William Nelson
   of 33
 
David, I'm interested in hedging some with these options....
December 7600 sounds like exactly what I want.
But, I haven't dealt with options before-would you mind explaining
a couple things to a newbie?

1. What exactly is one djx put? If I have one 7600 put in Dec. and
dow is at 7000, is it worth $600? Or 60? Or something else??
Also I saw several Dec 7600 puts listed for quite different
prices....but I couldn't understand the difference between them.

2. How do you exercise them if it comes to that?

Thanks in advance-

W.N.

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To: William Nelson who wrote (17)2/26/1998 8:58:00 AM
From: david siple
   of 33
 
hmmm. I will make an attempy. Pehaps someone else on this bd can fill in the gaps....
I.E. Dow's at 8500. You buy say 2 76 puts at 3$ each: 2x3=$600. The closer the DOW avg gets to 7600, the more you make money or go toward being "in the money." "In the money" is when it actually hits 7600; from there it's mostly all profit.... December is now 10 months away. The closer Dec. gets, the less your dec 76 puts are worth. In options, TIME is a major factor. i.e. if you bought them at $3 today and tomorrow the dow hit 9000, yr options would be nearly worthless. BUT, if the dow fell to 8000 tomorrow, it would be seen as a positive and time is on yr side--plus closer to yr "in the money" target price of 7600.
In regard to can you "exercise them..." I have no idea. I don't see how... (Someoene have a better answer???) Myself, I rarely exercise options: remember, when you do, you don't get your initial investment back (i.e. the 600$). IF you did/ or were able to, you would pay 7600x3= 22,800 to own it.... then, if the dow hit 7500 you would make 100$ (7600-100 points=7500$).
If this is too simplistic or difficult, pardon me.
Now, in regard to prices: you are seeing several listed??? Where? There is only one 7600 put (etc) w/ one bid n ask. Go to dailystocks.com , enter symbol DJX. Then towards bottom on left, choose option ("very complete"). That will show you puts n calls. The DJX Dec 76 put is DJxxx.
Does this help?
--ds

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To: david siple who wrote (18)2/26/1998 9:12:00 AM
From: MJR
   of 33
 
A great spot for the fundamentals of investing, including how to get a free starter kit on trading options on the Dow (although the principles are trie for all options) can be found at the Chicago Board Options Exchange's website at www.cboe.com.

The "official" answers are all there to your recent questions and better than add my personal spin on it, that's the source to go to.

Good Luck.. have fun with options!
Mike

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