Bay Networks (BAY) Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Bay Networks (BAY)

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Srinivasan V S who wrote (2157)	11/8/1996 8:55:00 PM
From: Mark The Trader	of 4270

Srini, Why would he want to sell calls that are at a strike price lower than the stock??? You should never sell a call on another call that is at a strike price lower than the strike price of the option you currently hold unless you goal is to probably take a loss and you are just lowering you cost basis ( but its still a bad idea). The time value of the March 25 call will not be anywhere near the cost of covering the January call if Bay keeps going up. And he would have to cover that option or be forced to purchase Bay @20. Hedging an option with another option usually is a losing game. I just looked and saw you said you are a novice at options :-} The person with the option has a long time till expiration, considering that Bay is at 23 I would advise him to wait a bit to see if the stock trends up and then sell the option outright . Selling calls on call options (its called a bull spread) is less desirable than selling the calls on the stock, however many times on volatile stocks the premiums are ripe enough to make it worth while. I dont recommend anyone doing this unless they have a very good grasp of how options work. Mark

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next