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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: dwight vickers who wrote (14846)7/22/1997 11:31:00 PM
From: Don Earl   of 42771
 
Hi Dwight,

My understanding of options is limited to a quick read through the booklets a broker is required to send out before you open an option account so feel free to correct me if this isn't right.

If I understand correctly if I were to write a covered call I would be required to hold the stock for the length of the contract. So if I write a one year contract for say $2 with a $10 strike price and the stock goes to $10 and gets called away I would make the same as if it went to $12 and I sold. If the stock goes to $12 then drops back to $8 at the end of the year without getting called away then I'm back where I started without getting a chance to take advantage of playing the ups and downs. If I have misjudged the bottom and the price goes into the basement I wouldn't be able to bail out if I wanted to.

There's no doubt that writing options are good for a quick buck, but setting a limit on potential profit and not being able to trade at will certainly increases risk. I know that a lot of people do very well trading options, on both sides of the bet. For now I don't feel my knowledge is good enough to play with real money. I am interested in learning more about options so if you know any good websites or books let me know.

Regards,

Don
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