After playing [the indexes] for the last few weeks with much success it is clear the SOX is the most volatile. My question is aside from the pricey options, are there any other negative factors to them? (September 8, 2001)
Not as far as we are concerned. One of the things we really like about the SOX is that it acts like more than just one stock but less than a big index. In other words, it tends to give more indications of its immediate moves just as an individual stock does without the risk associated with playing just one stock that is subject to news. For instance, after Friday's close we really like what we see in the SOX for at least a quick move higher. We can get in fast when it starts, and use the volatility to make at least a quick gain on a rally. We can then either sell out, sell part of the position to take some profits and continue the upside if things still look positive, or let it all ride. The speed of the move, the volatility, helps us get profitable faster. On the downside as you note, it can turn on us fast as well.
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