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Technology Stocks : USRX
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To: Dan Woodbury who wrote (17088)3/28/1997 10:58:00 AM
From: Lost in New York   of 18024
 
Dan says:

The one thing I don't understand about covered calls is what standard is used to determine when and if your in the money options get called. For example, if I sell May USRX Calls at 55 for a $5 premium (just guessing on the price) how long do I have to sit on the options if USRX rallies to 65 in April? Would I have to wait until May expiration for my stock to be purchased at $55 or could I expect the option to be exercised sooner? It is this uncertainty that makes me especially wary of writing calls on volatile stock.

I think as long as there's time premium left in the option, it won't be called. After all, the option holder could just sell the option for more $ profit. If there isn't very much premium you might lose it to arbitrage or so I've heard.

BTW, one good reference I've read is Options as a Strategic Investment by L. McMillian. It contains info on many different option strategies, maybe too much for some, but I found it very interesting if a little expensive, $50.

Dave
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