BULLISH

Situation:

Holding FAV (Favorite Stock) @ 74 1/4, 52-week high is 102; 52-week low is 65 5/8.

Outlook:

Bullish over the next 18 months, but looking to reduce risk over the short term.

Possible Strategy - Collar:

Hold 100 shares FAV; buy 1 FAV Jan (01) 70 put @ 8 5/8; sell 1 Jan (01) 95 call @ 8 1/2 ($12.50 net debit).

AT EXPIRATION (1/22/01):

* Max Gain: $2062.50 @ 95 or higher (+27.9%)
** Breakeven: FAV @ 74.375 (+0.2%)
*** Unchanged: Loss of $12.50
**** Max Loss: $437.50 @ 70/lower (-5.7%)

In a nutshell:

For (net) $12.50, your losses will be limited to $437.50 below 70.00 by the purchased put. The tradeoff is that your potential profit will be limited to $2062.50 above 95.00 due to the call sold. *Above 95, you will probably be assigned and deliver stock at 95.

BEARISH

Situation:

DJX @ 88.50. You are bearish, looking to limit risk but be rewarded if you are right.

Outlook:

DJX to decline by 5% over the next 2 1/2 months

Possible Strategy - Bear Spread:

Buy 1 DJX Sep (00) 90 put @ 3 1/8, sell 1 DJX Sep (00) 85p @ 1 3/8 , ($175 debit)

AT EXPIRATION (8/25/00):

* Max loss: $175 at DJX 90.00/higher (+0.6%)
** Unchanged: $125 loss
*** Break-even: at DJX 88.25 (-1.4%)
****Max gain: $325 at DJX 85.00/lower (-5.0%)

IN A NUTSHELL:

Possibility of a $325 maximum profit on a $175 investment if index drops 5.0%. If index is unchanged or higher, maximum risk is $175.