Zitel-ZITL What's Happening Message Board

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Technology Stocks : Zitel-ZITL What's Happening

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To: Blue_Horseshoe who wrote (16724)	7/21/1998 3:32:00 PM
From: Daniel Chisholm	Read Replies (2) of 18263

Just curious, why do you say that: "I am covered on my zitl long by a dec 7 1/2 call!" Message 5259932 -and- "Im long ZITL @ 4 1/4, and I sold the Dec 7 1/2 calls for 1 3/4" It seems to me that the call you sold is "protecting" you from any profit from ZITL moving over $7.5. It is not "protecting" your long position from any fall in price (though you might argue that the $1.75 premium you received for the call effectively makes your cost basis $2.5, so that you only lose money if ZITL drops below $2.5. I.e., it is protecting you by reducing the maximum possible amount of loss). Still, this seems to me like a complicated way to risk $2.5 in exchange for a possible gain of $5.0 (I'm considering here the "worst" case and the "best" case for you - the "worst" is that ZITL goes to 0, the "best" is that it goes to $7.5 or more). Best regards, and good luck, - Daniel

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