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Krispy Kreme Doughnuts, Inc. Message Board

  • mretrade mretrade Jul 26, 2001 10:51 AM Flag

    my big empirical test

    i've been on clearstation but feel like i'm reading greek. it has the bottom line recommendations (bearish, etc.) but what i want is these FROM THE PAST, so i can test if they would have worked. can anyone point me to somewhere where it says

    something like

    5/22 94 bearish blah blah
    5/23 92 bullish blah blah

    ???

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    • Buy call/sell put or buy put/sell call gives youa leveraged futures position effectively in the stock without the options time premium.

    • nope if it collapses i will move my puts down i hedged half my position with longer term puts (NOV) and the other and 25 % with nearterm puts. If u watch the puts barely move untill the downtred is solidly in place they are so over priced just like KKD was you can take advantage of that as the stock price drop catches up with the puts they just sorta sit there ususally you can move them down a full strike price increment of $2.50 for 30 or 40 cents cost. We all know we will get a bounce when we do i will close some of my puts at or near the stall of the bounce. My intent is to close my short by selling puts in the low 20s area and having them excercised eventually. This strategy has kept me in the game from my initial short in the mid 50s pre split and has allowed me to raise my AVG short position entry to a basis of just short of 98 Pre split or 49 Post split. Was kind of amusing to read the long posts about the suffering shorts, all the while they were helping me to turn a bad entry point into a HUGE winner of a position. I will probably go NET long via puts once we break 30 on a panic in anticipation of an oversold bounce to the 33 to 35 area.

    • yes, definitely a strategy. when i first started investing i sold some covered calls, but stopped because i got sick of limited gains.

      similarly, i can tell you right now you'll be freaking out if this thing collapses, despite the profit.

      why don't you sell calls? (can't?)

    • agree buying options is risky biz, also not pointed out is that options tend to price in predicted moves before they happen so thats why i use them as a hedge against my short either way it goes i win the options prem helps me offset my risk and the extra prem i get while limiting my profit comes close to just holding the short and assuming all the risk. I sold some NOV 35's for $7+ that gives me lots of room to wait out whatever bounce occurs while the premium evaporates. If your gonna use options consider being a seller of options and hold the underlying as your base play.

    • <KKD has a high maintenance requirement, so shorting 3000 shares would "tie up" about $50,000. But you could short less and still have the same long-term risk as constantly buying 3000 puts. >

      As an options trader I was not looking at "long-term" anything. Basically I was in it for the quick money. Unfortunately I didn't take the quick money when I had the chance, so you could say I lost it all because I started thinking "long-term".

      I believe that any investing in the stock market at these levels is a form of gambling, options are just a more severe form. Until the Dow gets down to about 5000 and the NASDAQ to 1000 and most people have stopped talking about the stock market, any long position is a gamble. However, the last five years have proved that any short position is just as risky.

    • """<NO, NO, NO. you can't look at return on investment, it doesn't make any sense to analyze it this way>

      You must be able to calculate some sort of "return on investment". Again, I don't know the mechanics of shorting, but don't you need to have some amount of money "tied up" to be able to short? How much do I need in an account to short 3000 shares of KKD? I would appreciate a serious response to this question, thanks. """


      OF course you can look at return on investment for a particular stock over a particular period. But it doesn't make sense to compare stocks vs. options in that way. IT's much more important how much you buy.

      KKD has a high maintenance requirement, so shorting 3000 shares would "tie up" about $50,000. But you could short less and still have the same long-term risk as constantly buying 3000 puts.

    • <NO, NO, NO. you can't look at return on investment, it doesn't make any sense to analyze it this way>

      You must be able to calculate some sort of "return on investment". Again, I don't know the mechanics of shorting, but don't you need to have some amount of money "tied up" to be able to short? How much do I need in an account to short 3000 shares of KKD? I would appreciate a serious response to this question, thanks.

    • If you short KKD on margin and the stock drops $5.50 what is your return on investment? It is a miniumum of 100% for the put. Wouldn't it be only a 50% return for the shorted shares using a 30% margin?
      ----

      NO, NO, NO. you can't look at return on investment, it doesn't make any sense to analyze it this way. you should look at risk, reward, and a matrix of possible gains and losses. think of it as return on your personal net worth, not return on "investment".

    • Sound like a good plan. It is hard for me to trust short interest figures because they are reported on a delayed basis. I also watch the put open interest. When put open interest greatly exceeds call open interest the market makers short the stock to hedge against the puts they have to sell.

      As for me I'm not so sure that KKD won't release a positive press release (if they have any left) and we might see a bounce in the next couple of days or next week.

      I likely will likely sell my puts before expiration so I get back some of the time value.

      Best of luck.

    • >WHAT???? If you really think it won't go above 37.5 no matter what, this is a horrible idea. Say you buy 1 contract. You basically have a short, plus you throw away $100 plus the spread plus the increased options commission straight down the toilet. Why not just short it on margin??? (with a stop, or a watchful eye)?

      If you short KKD on margin and the stock drops $5.50 what is your return on investment? It is a miniumum of 100% for the put. Wouldn't it be only a 50% return for the shorted shares using a 30% margin?

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