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Technology Stocks : AOL Options for the Bearish
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To: White Shoes who wrote (14)3/2/1998 5:10:00 PM
From: yard_man   of 33
 
Spreading is a good way to take advantage of the premium. You, of course give up some potential profit to do so. Selling an at the money call and purchasing a call at 10 points higher for the same expiration, for instance. I'll take a look at some prices and post tonight.

You do this for a credit. Suppose for each contract pair you get a credit of 7 points. Your potential gain then if the stock moves down by expiration the 7 points you received for establishing the position. If the stock goes up to infinity you can only lose the spread, 10 - credit, 7 = 3 points per contract. This is a good way to sell premium and let time work in your favor. Your profit is limited to the credit, however. If I can find time to get a broker and AOL doesn't break down -- I may try this.
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