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Biotech / Medical : Ligand (LGND) Breakout!
LGND 199.20+0.1%Nov 21 3:59 PM EST
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To: Dan O. who wrote (4598)8/6/1997 9:09:00 PM
From: Flagrante Delictu   of 32384
 
Dan, If someone buys the stock at $12.50 & then sells the 12.5-15.0 call spread for a $.75 credit, he will effectively own the stock at a net cost of $11.75. If the stock closes over[ or sometmies even at or below}$ 12.50 ,don't be surprised if it's called from you. The decision to call or not to call should be based not on where the stock closed on expiration, but on where it is expected to open the next session. I have called stock that closed below or at the strike . And I have had stock put to me without regard to the closing price. Sophisticated players know that a single closing price can be "influenced". But that's neither here or there. That's practical info. The academics don't believe that could happen. Theoretically,the stock would be called from you on a close over $12.50.Remember, you sold the $12.50 call for $1.75. You would still be long the $15 call. You would have to decide whether to exercize or not.Most likely you wouldn't consider exercizing unless the stock was over $15.00. If you do or don't exercize, all you've made is $0.75. You would make additional if the stock closes over $ !5 & you exercized your $15 call or else sold it before expiration.. What do you do if it closes at $15? This is a completely different situation than you described. Check it out.
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