NorthPoint Communications Holdings, Inc. (NPNT) Message Board

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Technology Stocks : NorthPoint Communications Holdings, Inc. (NPNT)

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To: ahhaha who wrote (306)	11/19/1999 2:17:00 AM
From: ahhaha	Read Replies (1) of 786

Whatever you do, don't take the advice in #324 and get involved in options. If you sell an option against your stock, you limit what the stock will gain on the upside in exchange for poor protection on the downside. If you're going to take a risk and seek superior gains, take it, don't hedge. Otherwise, why bother? This is how it works. You sell a call against long NPNT and NPNT rises. You receive an exercise notice that tells you your stock has been taken and exchanged for cash. Now you're in cash and while you're fumbling to get the money back into NPNT as it runs away, you lose 5 points, buy at an intermediate top, and end up losing 10 points for 3 points protection had the stock fell. Even if it falls you sweat while the stock threatens to rise through strike. You are only relieved when the stock is dropping. You think it's a great victory because the call expired worthless and you made 3 bucks on it on the way to lose 5. Well, at least you didn't lose 8 for all that sweat. The stock rises back to where it was and so nothing materially changed but the accumulated stress took 2 more years out of your hide.

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