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Strategies & Market Trends : Canadian Options

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To: william smith who wrote (409)	5/6/1997 7:05:00 AM
From: Porter Davis	of 1599

<<What is the best play?>> Will, we should all have this problem! "1. Your are long 1000 share of XYZ which you bought at $40 2. You sell June $45 calls and recieve $1.2 3. The stock climbs to $49 " It largely depends on your view of the stock--if you think its had its run you would probably be best taking your money off the table by closing out the position (be sure to enter the order as a spread, ie, 'sell XYZ and buy XYZ June 45 for $x credit'). If you think the stock has more to go on the upside, consider rolling up and out. Buy back the June 45s and sell the Sept 50s. On a volatile stock, you can usually do this for a small debit. (Again, enter this as a spread order...don't get greedy, but in an active stock aim for a .10 or .15c savings over the posted bid/ask spread on the two series) This means you're ahead $9 minus the difference between the Jun45 and Sep50, and you can continue to do this for as long as you're comfortable owning the stock. Hope this helps. Happy trading. Porter

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