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Strategies & Market Trends : Tech Stock Options

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To: The Jedi who wrote (20010)	8/18/1997 4:14:00 PM
From: Melissa McAuliffe	of 58727

Lisa--Thanks for directing me to this thread. I am new to options though learning more every day. I have written covered calls in the past more as supplemental income but today I actually bought my first calls. I wanted to run my thought process by you to see if I am thinking the right way. If people feel my questions are too basic, please let me know if they are better elsewhere. Anyway, I have followed PSFT for a long time and love this stock/company and at this point would only trade options in a stock I know. It is very volatile however, which I understand is actually better for options. Anyway, this morning the stock was at 54 1/4 it's most recent low..Though it has been going down lately I believe it will go back up.barring a market crash or something. I have been looking at PSFT options for a week now and was originally thinking of buying October 55's when the stock was slightly over 55. I know enough now to know that I should only buy in the money calls. But I also know that time works against the buyer so I thought I should probably look at January which I did today. The Jan50's were at 10 1/4 and the 55's were at 7 7/8. So I figured out that the 50's had $6 of time value and the 55's had $7 7/8 which meant the 50's were a better risk even though they cost more. I would have bought the Octobers which cost much less but I thought what if the market corrects for the next two months and I never get back my initial investment. So I bought 4 Jan 50's at 10 1/4. (Before I had any idea what I was doing which was two weeks ago I probably would have been planning to buy the September 60's or something because they cost alot less) In my wildest dreams I would never have believed I would ever pay $10 for an option and for some reason I found it much more nerve wracking than buying stock especially when the stock dropped to 53 1/2 shortly after I bought.-------- (NEW)-Since I started writing this the stock went to $56 so I just sold my options for $11. Though I only made $234 after commissions I figured it's still 5.6% for the day. Even though I made money, I would still like someone to confirm my decision process. Now I wonder if I should have bought the October 50's and bought more for the money which would have meant making more money. Also, could someone please explain why when the stock moved up 1 3/4 the option only moved 1 1/4 and the spread went from 3/8 in the morning to 5/8 in the afternoon but maybe that's because there was no volume today except mine. But no matter what I feel good that I made money on my first option trade. Melissa

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