blaine, not correct. If you're long in a stock, and you want to sell, selling covered calls to lock in your gains isn't a bad strategy at all.
Let me explain. In Goldman's case, they own x number of shares long (hopefully not too long in the case of Compaq, or they're upside down). They sell covered calls for August 98 at a strike of $30. Let's say they received $6 in premium per share for the calls. That means they're out at $36 when the option is called, no matter where it is trading at August expiration (unless it is below $30, and then they wouldn't get called. I don't think it will be below $30 then).
Now Goldman is either betting on being called, and being out at a net of $36 per share, or the stock dropping to below $30 by August expiration (a highly unlikely scenario), not being called, and pocketing the premium.
It's either bearish, because they're locking in their net at $36 and getting out, or because they expect the stock to tank in the very near term.
In either event, their position is not very favorable towards CPQ.
Regards,
LoD
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