Compaq Message Board - Msg: 12156123

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Technology Stocks : Compaq

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To: rudedog who wrote (72945)	12/1/1999 1:14:00 PM
From: Night Writer	Read Replies (3) of 97611

rudedog, I have a great respect for your current option plays. I learned the following about options and I could be wrong but it makes a lot of sense to me. Selling covered calls or naked calls is technically called going short. Selling naked puts is going long. Buying calls is going long. Buying puts is going short. Many people sell covered calls to make some additional money on stocks they hold. (Including me.) They don't think of it as a short play, but they are betting that the price will not increase beyond the strike price. This is technically a short play. Selling Jan 2002 $35 LEAPS covered calls is betting the price will be below $35 at that time. Either that or the stock price will drop enough to repurchase the calls for less then you sold them. Given the large spreads on LEAPS the price needs to drop greatly for any sizable profit. With Compaq's current reversal to the upside, I would not be selling this call. Ask your broker. I bet he agrees. NW

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