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Technology Stocks : Compaq
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To: Bob L who wrote (17922)2/23/1998 6:15:00 AM
From: Mike Gordon  Read Replies (1) of 97611
 
<But if you had bought back the call just before expiration and then wrote another call, there would be the same two commissions as letting the stock go to assignment and then writing a put. So there must be another advantage that I'm missing.>

Bob: You can go either way. My preference is this:
A. To buy the call back just prior to expiration can be expensive due to the spread between the bid and ask price, ie. 1/16/to 1/8 or $62.50 to 125 + commission.
B. For my purposes, I like to be in the short put position because the cash which represents the back-up for the put continues to earn broker interest.

The downside could be the near term movement of the stock. Sometimes its best to wait until a stock moves up. However, when you wait, you loose time premium or the issue goes down. Therefore, I pull the trigger anytime between one week prior to one week after options x date.

Mike Gordon
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