Options Message Board - Msg: 13398487

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Strategies & Market Trends : Options

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To: Jill who wrote ()	4/11/2000 3:34:00 PM
From: hivemind	Read Replies (1) of 8096

The post about about doing a buy-write csco@74 apr 40 (!) frightened me. I am a newbie when it comes to options, but I have learned from reading/lurking/asking, so I'm posting the following for new-newbies: Holding 100 shares of stock allows 1 call to be written (usually. See notices at the cboe website for odd situations such as mergers/aquisitions/spins.) Selling otm/atm gets you the time/volatility premium, you risk upside beyond strike. You also risk normal long stock downside (less premium received - insurance value of CC's). Selling itm gets you intrinsic value + some time premium in cash. You have committed to sell the stock at strike price. At expiration you will receive nothing else but strike price for your shares. You are effectively short a portion of each share (current stock price - strike = short value), although you are covered. Recommended reading: CBOE options book: amazon.com McMillan's book: amazon.com Hope this is helpful. It was for me. :) hivemind

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