Compaq Message Board - Msg: 16674819

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Technology Stocks : Compaq

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To: Jerome who wrote (93782)	11/17/2001 11:07:43 PM
From: The Duke of URL©	Read Replies (1) of 97611

was doing the math on some new option position for Monday and I noticed that for CPW the Jan 5's are trading at $5.20 by 5.40... which means that there is little or no premium attached to them relative to the stock price. So if the stock and the options are the same price , it would be smarter to buy more options and less stock. My plan for Monday is to buy the Jan's 5's and once the order is filled sell off my CPQ stock. Not exactly, the risk of loss is higher in the options because they expire on x date whereas the stock value does not. In addition, the odds of a loss on the options is GREATER than that of the stock and you are only getting a 50% discount. Casual Empiricism dictates that the discount to make the purchase favorable oddswise would be at LEAST 80%, maybe more. Sure, your gain is more (2x), but your risk is increased more than 2x. Bad Bet.

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