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Strategies & Market Trends : Three Amigos Stock Thread

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To: Sal D who wrote (7782)	8/16/1998 8:51:00 PM
From: Sergio H	Read Replies (2) of 29382

<The call option enabled a long term investor to purchase a stock and limit the risk during the initial holding period. The trade offs: The negative was a higher purchase price and the positive was limited risk.> Sorry to disagree with you. Joe, in your example, Mike bought one option for $150.00. The co. had a bad earnings report and the stock dropped below the strike price. 100% of the investment was lost. Buying the shares, it would be unlikely to lose 100% of the investment. Options are always riskier. The interest earned on the money not invested is minimal and does not offset the money lost. The commission on this investment (buying 1 call) is at least 20% of the money invested for a round trip. Joe, I don't think that buying 1 option is a good idea. Sergio

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