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August 31, 2004

Sample Letter for Credit Repair

Filed under: Credit, Finance — Patsy Rose @ 11:59 pm

If you are surfing the web looking for information about credit repair, you will find free credit repair letters at several sites, but you will also find that there are software programs with “fill in the blank” type letters. Whether you choose to pay for a sample letter for credit repair or use one of the free credit repair letters, the process is the same.

Before the letter writing can begin, you will need to obtain copies of your credit report. These can be viewed and printed at www.annualcreditreport.com. The Federal Trade Commission (FTC) recommends that you spell it correctly or you may end up at an impostor site. The FTC also has brochure which includes a sample letter for credit repair.

Once you have your credit reports, you will need to check them for inaccurate information and report the inaccuracies to the applicable credit bureau. This is also referred to as a dispute or disputed information. You can use the wording in this sample letter for credit repair or the wording in other free credit repair letters. The main thing to remember is to keep the letter unemotional. Simply state the facts.

Sample Letter for Credit Repair:

Today’s Date

Some free credit repair letters suggest that you include your name and address at this point, others include it at the end. The FTC sample letter for credit repair suggests the use of the phrase “complaint department”. The use of that phrase, as well as where to put your name and address seems to be a personal choice.

Address of the Credit Bureau which is reporting the inaccurate information:

Equifax

PO Box 740256

Atlanta, GA 30374-0241

Trans Union

PO Box 2000

Chester, PA 19022

Experian

PO Box 2104

Allen, TX 75013

Re: Credit File Problem

To Whom It May Concern: (Dear Sir or Madam)

I recently reviewed a copy of the credit file your company maintains in my name. While doing this, I identified the following problem(s): (The sample letter for credit repair suggested by the FTC is written a little differently.)

I have enclosed the following documentation that supports my claim:

If you have any “proof” that the information is inaccurate, (statements, cancelled checks, the “proof” depends on the individual item) list it here and enclose a copy (not the original). If it is not possible to provide “proof”, for instance if you do not believe that you ever had an account with a listed company, simply state what information you are trying to correct and leave out the line about documentation.

Please investigate and correct this (these) problem(s) as quickly as possible and send a corrected copy of my credit report to my home address.

You may want to include a copy of the inaccurate credit report with the disputed information circled or highlighted. If you are disputing several items, you can use one letter for all or one letter for each. The credit bureaus may be less likely to consider a claim frivolous if you send one letter for each disputed item. They are not required to investigate disputes which they consider “frivolous”.

Examples of free credit repair letters close formally, using “Sincerely” and your signature.

If you do not receive a response from the credit bureau within 30 days, you can send a follow-up letter. A follow-up sample letter for credit repair follows. The date, greeting, closing and addresses would be the same. The body of the letter would be something like this:

On (applicable date), I contacted this bureau regarding the inaccurate information in my credit file. I have waited a reasonable amount of time and have received no reply regarding my dispute. Please correct this information immediately.

You may want to include a copy of the original letter, credit report and any documentation that you originally sent. If the credit bureaus do not respond to your requests; if you cannot achieve results using this or another form of free credit repair letters or a sample letter for credit repair included in software programs, contact an attorney, preferably one that specializes in credit repair issues.

For more information about the sample letter for credit repair, visit the Credit Repair Blog.

The writers and editors of the Credit Repair Blog are committed to providing accurate information about credit repair issues. Visit us at http://creditfixnow.blogspot.com

Health Care Plans Quickly and Easily Explained Part 1

Filed under: Insurance — Tim Gorman @ 10:58 pm

If you have started you your research into what the best health car plan for you and your family is then you’ve more then likely hit a few roadblocks. Don’t be alarmed, that’s actually a common occurrence for many consumers looking to find the best deal for their health care insurance needs, especially when trying to determine the best health care coverage for your loved ones. You may have noticed that some health care plans differ in the amount of coverage they provide, the amount you pay as a premium, your co-payment amounts and even your deductible amounts.

One of the major differences in many of today’s health care plans is what services and medical treatments they will cover, especially with many health insurance companies taking the high road of offering better benefits towards routine treatments and preventive health checkups in an effort to reduce illnesses, major medical emergencies and hospitalization requirements. You can expect a medical pre-screening or physical along with a lengthy health questionnaire in order to identify any current or pre-existing medical conditions that could eliminate your potential to receive health insurance.

If you do have medical issues to include diabetes, hepatitis or any other major medical condition and are still granted the right to receive health insurance coverage then be fully prepared to pay a higher premium for your health insurance. This is also true if you are labeled or identified as a smoker.

Health care plans are broken down into two different categories of coverage; the indemnity healthcare plan sometimes referred to as fee-for –service and the more common managed health care plan. Both have their pluses and minuses, as you will soon discover.

The indemnity plan offers the most flexibility because it allows you the privilege of choosing or using your own or preferred health care professional, whether they are a doctor, physician or medical specialist. You also have the right to pretty much go to any hospital or clinic to seek medical treatment and referrals are not necessary to seek out specialists in certain medical fields. However as with most things in life, the costs justify the means and an indemnity health plan is no different. The deductibles on these plans are higher then a managed health care plan and more money comes out of the patients pocket (sometimes upfront) based on letting you use a doctor that is outside the health network your health insurance provider has established.

Although most prescriptions and treatments are covered under these plans you can expect to pay for other medical procedures that seem rather mundane and routine such as a physical.

This ends part 1of our 2-part article on health care plans quickly and easily explained series of articles. Be on the lookout for our next article which will focus on the more common managed health care plans which includes Health Maintenance Organization (HMO), Preferred Provider Organization (PPO) and Point of service Plans (POS).

Timothy Gorman is a successful Webmaster and publisher of Easy Health Insurance Guide. A website that specializes in providing health insurance advice to include easy ways to find cheaper indemnity health care plans that you can research in your pajamas from the comfort of your own home.

Lobster Tales In Choosing The Best

Filed under: Cooking-Tips, Food-and-Drink — Pat Murphy @ 10:01 pm

Lobster, lobster recipes, lobster tails, maine lobster, soft shelled lobsters, green lobsters, and red lobsters. The choices seem endless when it comes to lobsters. But hard core aficionados have stated again and again that all it takes is a little know-how and the most simple and practical solutions to fully enjoy this king crustacean. Below is a simple guide for choosing lobsters for your palate.

Color, gender, shell texture, and age are the basic choices lobster, lobster recipes, lobster tails, maine lobster fans and cooks alike face when picking their lobsters. There are basically two colors to choose from: the red or the green lobster. There is no debate in this since they basically taste the same. The subtlety of the difference between their flavors are effectively masked by the butter sauce. A more pressing choice is the choice of getting which gender. Lobstermen agree that the female is a better choice. Female lobsters may have roes, or unfertilized eggs which are tasty and considered as delicacy. Also, female lobsters have more tail breadth which means more meat. They need the extra size for carrying the eggs. How to tell a male from female lobster? Aside from the added breadth, females’ swimmerets (the appendages under the tale) are light and feathery unlike the males’ which are bony and hard. Another issue still in debate is the choice between getting soft shelled or hard shelled crustacean kings. This is usually settled by preference. Lobsters with soft-shells have just undergone moulting, which means that their shells are easily breakable. This translates to easier cooking and eating. Their flesh are also deemed to be sweeter-tasting. However, these soft and sweet lobsters are not without disadvantage. They are not good for traveling because of the delicate condition of their shells. Hard shells are then preferred when a lobster is expected to travel long distances especially in delivery. Hard shell lobsters are also bigger and meatier.

Though, lobstermen, fish market operators, and chefs agree that the choice of lobster is basically dependent on the consumers’ preference, the method of preparation is still a big factor in choosing lobsters. Chefs and cooks usually choose their lobsters based on how they plan to prepare it. In planning to do whole lobster, lobster recipes, lobster tails, maine lobster specialties, or seafood soups, the kind of lobster to be used is vital. Hard shells are usually preferred for rough cooking like grilling, roasting, or baking as their shells can withstand the heat. Soft shells are usually prepared by steaming to avoid causing damage to the delicate shell. Females are preferred for soups and other savory dishes because of the added flavor of their roes. Male lobsters are best eaten boiled. Yet, almost everybody agrees, that with lobster, you can’t go wrong with butter!

For more valuable information on lobster and lobster recipes, please visit http://www.lobster-tails.net

Leaning the Collar Strategy

Filed under: Finance, Investing — Ron Ianieri @ 8:26 pm

Like other strategies, the collar can be leaned toward the
investor’s perception of the stock’s direction and strength.

Let’s look at the potential leans that can be taken. Say that
you have a very strong feeling the XYZ is going to go up.
Instead of buying a put and selling a call with strikes that are
roughly equidistant from the stock price, you would sell a call
that is further out-of-the-money.

This would allow more room for a larger increase in stock price
because the stock would not be called away as early. You retain
ownership for a longer period of time during the increasing
price period.

Of course, by increasing the distance of the option’s strike
away from the stock, the amount of the call’s premium will
decrease. The overall effect is that you’ll have to pay more to
own the position. (You will pay out more money for the put than
you will receive from the call.)

Again, we’ll start with the same prices as in our original case,
(stock $28.00, Dec. 27.5 put $1.00 and Dec. 30 call $1.00) only
now we will change the Dec. 30 call at $1.00 to the Dec. 32.5
call at $ .35.

In our other examples, we incurred no debit or credit from our
option position. This time, with the bullish lean, a debit is
incurred. The purchase of the Dec. 27.5 put for $1.00 combined
with the receipt of $ .35 from the sale of the Dec. 32.5 call
produces a $ .65 debit.

Remember, this debit must be subtracted from the bottom line
profit or added to the bottom line loss of the stock’s capital
result. This means that before you make any money from the
position, the stock must trade up $ .65.

If the stock stays stagnant you will lose $ .65, and any capital
loss you incur will be $ .65 worse. Now back to the position in
our previous example. With the selling of the Dec. 30 call, we
had an upside potential of $1.50. In this example things change.

As was stated, our maximum upside potential is calculated by
setting the stock price at the strike price of the short call
which is 32.5 in this case. With the stock at $32.50 at
expiration, you would have a $4.00 stock gain since the stock
was purchased for $28.50.

Remembering your $ .65 debit to enter the position, we subtract
that from the $4.00 and we have a total maximum profit of $3.35.
This is significantly more potential reward than our original
example using the Dec. 30 call.

As in all trading situations that offer a higher potential
reward, there comes a higher potential risk. If the stock stays
at $28.50, (the stagnant scenario) you have a loss of $.65 in
option costs. In the down “scenario,” calculating the maximum
risk is done by setting the stock price at $27.50 on expiration.

The stock, purchased at $28.50 has lost $1.00. The options, not
neutral, resulted in a $.65 loss. The total loss is $1.65. In
both the “stagnant” and “down” scenarios, the loss increased
over that in our original example. As you can see, the higher
potential gain is accompanied by an increased potential risk.

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and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
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How Does Collar Strategy Work in Different Scenarios?

Filed under: Finance, Investing — Ron Ianieri @ 7:14 pm

Let’s take a look at how the strategy works with this position.
For the sake of our illustration and to make our calculations
easy let’s establish the collar using the December 27.5 put and
the December 30 call, with both trading at $1.00.

Remember our stock price was $28.50. The cost of the collar will
be $0 because you paid $1.00 for the put but you collected $1.00
from the sale of the call. How does the collar work in our usual
three scenarios: the “up” scenario, the “down” scenario and the
“stagnant” scenario?

In the “up” scenario, we find that when the stock rises, the
investor gains penny for penny until the stock reaches the call
strike. Once the stock reaches that level, the position no
longer gains because the stock is at the point where it will be
called away.

Capital gains of the position are maximized when the stock
reaches the call’s strike price. Let’s take a closer look at
what happens as the stock price goes up. With the stock at
$29.00, both the Dec. 30 calls and the Dec. 27.5 puts are out of
the money and thus worthless. Since there was no debit or credit
incurred in the options, the option profit (loss) is $0. Only
the stock position remains. The stock purchased at $28.50 is now
trading at $29.00 for a $.50 profit.

Let’s raise the stock price to $30.00. The puts and calls are
again worthless so your profit (loss) is solely determined by
the stock. The stock, which was purchased for $28.50 is now
worth $30.00 and represents a gain of $1.50. This $1.50 gain is
the maximum gain the position allows.

Once the stock goes over $30.00, the Dec. 30 call, which we are
short, would become in-the-money and therefore the stock
position would be called away at that price. When the stock
price rises to $31.00, the puts would be out-of-the-money thus
worthless but the calls would be worth $1.00.

You received no money for the establishment of the collar so you
would have a $1.00 loss in the options. Meanwhile, the stock
that you purchased at$ 28.50 is now worth $31.00 at expiration,
which is a $2.50 gain.

Combine the $2.50 gain in the stock with the $1.00 options loss;
you have a $1.50 profit again. You may do this calculation with
higher and higher stock prices but the outcome will always be
the same. This example shows how your upside potential is
limited.

Obviously, if the option portion of the collar incurred a debit
or credit, that inflow or outflow of money must be added to or
subtracted from the stock gain to get the overall return of the
position.

Normally, there will be a debit or credit incurred in the
collar. It is usually difficult to find a put and a call that
you want to use in the collar trading at an equal value. Let’s
use our last example with some minor price changes.

If the put had been trading at $1.25 instead of $1.00, then
there would be a $.25 capital outflow that would have to be
subtracted from the $1.50 gain to reduce it to only a $1.25
gain.

On the other hand, if the call was trading at $1.25 then you
would have collected an extra $ .25 which added to the $1.50
gain would produce a $1.75 gain. The cost of the collar always
impacts the bottom line profit or loss of the position.

Looking at the collar in the “stagnant” scenario, the stock
price would be unchanged thus neutral in terms of return.
Therefore, the potential profit or loss would come strictly from
the debit or credit of the two options.

If the stock does not move, as in our example, both the put and
call would finish out-of-the-money and be worthless.

Our profit or loss would simply be calculated from whether you
paid for the collar or collected from the collar and how much
that amount was.

Using the same prices as the previous example (the stock
purchase price of $28.00, the Dec. 27.5 put $1.00 and the Dec 30
call $1.00) we will now take a look at the “down” scenario.
Let’s set the stock price at $28.00 on expiration. At this price
both the Dec. 27.5 put and the Dec. 30 call are out-of-the money
and worthless. Since there is no credit or debit incurred in the
option position ($1.00 inflow from the calls, $1.00 outflow from
puts) the total return of the position is simply the gain or
loss from the stock.

With the stock purchase price of $28.50 and a stock price of
$28.00 on expiration, there will be a $ .50 loss in the
position. Setting the stock price at $27.50, we see that the
Dec. 27.50 puts and the Dec. 30 calls are again worthless and
with no debit or credit incurred, the positions profit or loss
will come down to the gain or loss on the stock.

With the purchase price of the stock being $28.50 and the stock
price at expiration $27.50, there will be a $1.00 loss. In this
case, we have reached the maximum loss. No matter how low the
stock goes, you can only incur a maximum loss of $1.00.

Now, let’s set the stock price at $26.00 and see if this holds
true. With the stock at $26.00 on expiration, the Dec. 30 calls
are out-of-the-money and worthless. The Dec. 27.5 puts, however,
are in-the-money and now worth $1.50.

The stock you purchased for $28.50 is now worth $26.00 on
expiration which is a $2.50 loss. Combining the $2.50 stock loss
with the $1.50 gain in the puts and you have a $1.00 loss in the
overall position.

This demonstrates that $1.00 is the maximum loss of the
position. Keep in mind that if the stock position creates a
debit or a credit, it must be added to, or subtracted from the
stock loss.

Most of the time, there will be a small debit or credit incurred
in the option position. It is relatively infrequent that the put
and call used in the collar are trading at the exact same price.

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and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
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The Collar Strategy

Filed under: Finance, Investing — Ron Ianieri @ 6:58 pm

Another protective strategy that allows for some upside capital
gain while providing maximum down side protection is the collar.

The collar is a combination of the covered call and protective
put strategies. The collar uses a long put position in
coordination with a short call position along with a long stock
position. The ratio is one short call, one long put (not of the
same strike) and 100 shares of stock.

As you remember, one contract is equal to 100 shares. The
options that we will use to construct this strategy will be
out-of-the-money puts and calls.

The object here is to construct a protective put strategy
without having to pay for the purchase of the put. We talked
about premium in the covered call strategy and how we are better
off collecting premiums over a period of time, not paying them
out. By selling the call, we collect premium which can be used
to offset the capital outlay we incurred for the put purchase.

We said that two of three scenarios in the covered call strategy
were positive while the protective put scenario had only one
scenario that produced a positive outcome.
However, the protective put was the strategy that provided the
most downside protection. The challenge was to construct a
protective put strategy without paying out money. The solution
is the collar strategy.

The collar takes on the characteristics of both the protective
put and covered call strategies. Like the covered call, there is
an upside cap on profits and like the protective put there is
unlimited downside protection.

Ideally, the collar is set up to be an “even” trade meaning you
neither receive nor pay out any money. Realistically, depending
on the options used, you may have to pay out a small premium or
even receive a small premium but the goal of the collar in terms
of premium is to be neutral.

As mentioned previously, to construct a collar, just buy one
out-of-the-money put and sell one out-of-the-money call per
every 100 shares of stock owned.

Obviously, the put and the call must be of differing strikes (it
is impossible for a put and a call of identical strike price to
both to be out-of-the-money or both to be in-the-money).

For example, with a stock priced at $28.50 a collar may be
constructed by the purchase of the December 27.5 puts and the
sale of the December 30 calls. Hopefully, the price of the call
and put are close enough so that the funds generated by the sale
of the call are enough to offset the cost of the put purchase.

Amazing Options Trading Strategies For Safer Investing
and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
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GM Chart – Protective Put Example #4

Filed under: Finance, Investing — Ron Ianieri @ 5:27 pm

NOTES ON GM General Motors
Protective Put

1. After trading in a tight range for a considerable period of
time with low volatility, GM’s volatility spiked in early
December 2003 and the stock gapped open considerably higher,
followed by another breakout gap opening several days later.

2. This second gap opening forced the stock up through a
previous resistance level, as the stock broke out and began a
new, higher trading range.

3. The stock then advanced five of the next seven trading days
with bigger intraday ranges than average during the previous 12
months, indicating increasing volatility.

4. The initial GM breakout, when it traded through $44.00 and
quickly proceeded to trade up to the $54.00 range in less than
one month, represented a 25% return in a very short period of
time.

Conclusion: GM is a perfect example of an opportunity to use the
protective put strategy to provide protection against a false
break-out when buying a stock on a technical breakout.

In this case, GM had been trading in a lower volatility pattern
for several months, which would have kept option premiums down.
This would have allowed the investor to purchase the put at an
advantageous price.

With the protective put in place, and at a relatively
inexpensive price, the investor could ride the break-out with
patience and confidence, with limited loss and controlled risk.

Even though this stock was in a rapid uptrend after breaking out
of its previous trading range, and the protective puts purchased
would have expired worthless, it still would have been a good
idea to put on this protection in case the stock pulled in.

Gap openings tend to get filled at some point before proceeding
higher, and in the case of a rapid sustained rally, there is
usually some type of pullback when the stock is overbought.

In this case, the puts would not have been profitable, but would
have provided the necessary protection in case the rally failed,
or temporarily retraced.

We wanted to show this example where the puts would not have
been profitable, because you never know where the stock is going
to go. But even though the puts would have expired worthless,
the rise in stock price would have clearly offset the cost of
these puts.

So again, the protective put strategy here would have provided a
cost effective insurance policy against the stock’s pulling back
or a failed rally.

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and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
http://www.options-university.com

WMT Chart - Protective Put Example #3

Filed under: Finance, Investing — Ron Ianieri @ 4:31 pm

NOTES ON WAL-MART (WMT)
Protective Put

1. In mid-November 2003, Walmart opens down $1.50 to $56.25 and
proceeds to trade down from there breaking the lower end of an
uptrend channel.

2. Wal-mart then has a quick consolidation in mid-November
around the $54.50- $55.00 level followed by a small technical
rebound back to around $56.25. This may have been due to some
investors thinking that the consolidation was a bottoming and
thus a buying opportunity.

As it turned out, it was a false bottom and the stock traded
back down rapidly to lower lows. A purchase at that level
probably led to losses.

3. In early December, Walmart starts another consolidation
around the $52.50 level. It seems to be another buying
opportunity for bottom fishers. There has already been one false
bottom that has cost someone a lot of money. If that investor
employed a protective put, the loss would have been limited and
they may have been able to purchase again at this level if they
wished.

4. The $52.50 level turns out to be another false bottom and the
stock trades down another $2.00 to $50.50. Here again, the same
opportunity exists. Is this the bottom? If it is, a nice profit
can be made quickly. If not, losses can mount quickly as another
false bottom occurs and the stock trades down rapidly. This
level, so far, turns out to be a good buying opportunity as the
stock rebounds back up to $52.50 quickly.

Conclusion: Bottom fishing can be a very risky endeavor;
however, an investor can not ignore the potential reward that
comes with the risk. If the risk can be minimized without
affecting the potential reward to a significantdegree, the
risk/reward scenario will be an advantageous one for a potential
investment.

The protective put will accomplish this perfectly. In a case
like this, the protective put strategy should be employed at any
level where the investor deems it worthy of a capital
commitment.

Amazing Options Trading Strategies For Safer Investing
and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
http://www.options-university.com

AMGN Chart – Protective Put Example #2

Filed under: Finance, Investing — Ron Ianieri @ 4:14 pm

NOTES ON AMGEN (AMGN)
Protective Put

1. With the use of Technical Analysis, Amgen is identified to be
poised to break down through a technical support as determined
by a line drawn through three bottoms points, occurring in
January 2002.

2. Then, in May 2002, the stock breaks down below the support
line indicating an upcoming drop to a new, lower trading range.

3. The stock begins to consolidate at around $46.00, and
attempts to rebound. A protective put can be used here with the
purchase of the stock in case the stock has a false bottom.

4. Indeed, this level is a false bottom as the rally fails, and
the stock heads lower before the next consolidation level at
point around $41.00. Again, stock may be purchased here with a
protective put.

5. The rally fails again and the stock falls to around $32.00,
before putting a final bottom & reversing. Again, a protective
put can be purchased here to guard against further downside. At
this level, the stock begins its real rally and rises quickly
from this point to provide an outstanding return from $32.00 to
a high of $72.00 in one year.

4. In September 2002 at a stock price around $41.00, you could
also buy a protective put as the stock pauses in its uptrend
before continuing higher. At this level, the stock could be
gathering up strength for the next leg of the rally (which it
does) or it can become tired and begin to trade down again.

CONCLUSION: The protective put allows the investor the room to
be wrong by limiting the total loss. Because the loss is
limited, the protective put investor has a staying power not
afforded to naked stock buyers who would feel the full brunt of
the loss.

This ability to play again increases the protective put buyer’s
chance of being right and therefore more profitable than the
naked stock buyer would be. The Amgen chart is a textbook
example of a stock in position for the use of the protective put
strategy.

Obviously, this was a risky trade, but one that could, and in
this case did, provide an outstanding return. This is the
perfect time to use the protective put. The protective put
provides maximum protection in risky situations while allowing
you to have almost the maximum available upside.

So, if you did buy the wrong bottom, the put would have bailed
you out by limiting your downside and saving you enough money to
try again. As you see from the chart, within 12 months of the
July 2002 low of around $32.00, the stock traded to a high of
over $72.00. This profit is more than enough to have covered the
purchase of a few puts.

As stated earlier, this is a textbook case and one that should
be studied for its value of properly showing why and when to use
the protective put.

Amazing Options Trading Strategies For Safer Investing
and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
http://www.options-university.com

RJR Chart - Protective Put Example #1

Filed under: Finance, Investing — Ron Ianieri @ 2:41 pm

NOTES ON RJ REYNOLDS (RJR)
Protective Put

1. Up until early March 2003, RJR was in a trading range with a
high of $47.50 and a low around $38.00.

2. In early March, RJR broke that low around $38.00 and traded
down to around $28.00 before trading back up to the $38.00
level. It failed to break that resistant level a couple times.
Then, in mid-September 2003, RJR gaps up and breaks the
resistance level.

3. Normally, when a stock breaks a resistance level, it normally
trades up to find a new range most specifically a top of the
range. Often, there is an opportunity to make a large gain in a
very short amount of time when a stock beaks a support or a
resistance.

4. After breaking out of the previous trading range, in
mid-September 2003 at a price of about $40.00, RJR trades up to
$60.00 by mid-December 2003. This represents a 50% gain in
approximately 3 months.

Conclusion: RJR offers investors two opportunities to use the
protective put strategy and in two different ways.

First, the protective put strategy can be used to provide
protection when an investor tries to pick the bottom in a stock.
The wrong bottom can cost the investor dearly if they buy the
stock naked. The put will limit and control the loss, allowing
the investor to be wrong, but still allow the opportunity to
hold out or play again.

Second, RJR later shows what a stock can do when breaking out of
a technical resistance. It can provide investors with large
potential gains. However, the fact is that stocks that do break
out can, and sometimes do, fail and trade down to the bottom of
the stock’s previous range. This can leave you with a large
loss.

The protective put strategy provides maximum protection in case
of a false break out, while allowing for full capital
appreciation less the cost of the put if the break out is real.

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