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Strategies & Market Trends : Continuing the IFMX discussion and more...

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To: Robert Graham who wrote (190)	9/15/1997 5:17:00 PM
From: Melissa McAuliffe	of 206

Bob, Here's a question for you. I am continuing my reading of McMillan's book and was reading about bull spreads. So let's just say that I want to trade PSFT stock but because of its price want to do it through options. So, for this example, let's say I buy January 60 calls at 7 3/8 and sell Jan 65 calls at 5 1/8 for a net cost of 2 1/4--these are today's actual prices. And let's just say for purposes of this example that I plan to close these positions when the stock moves three or four points from its current price. How would I calculate my anticipated gain here? I know the 60's should move more than the 65's but by how much? This concept seems like it has alot of merit because though my upside is going to have some limit I also have minimized my risk. I think maybe I am missing some key point here so would much appreciate your remarks/comments. Melissa

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