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Strategies & Market Trends : Tech Stock Options

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To: Gary E who wrote (58352)	2/24/1999 9:18:00 PM
From: Lee Lichterman III	Read Replies (1) of 58727

Imagine you buy out of the money $10 calls on stock ABC when it is selling for $9. It rises into the money and closes on Friday at $15. You will make $5 if you exercise (get to buy 100 shares at 10 for each contract). You ae watching the news and find out ABC's company made the clothes that just gave the whole world cancer and they will become bankrupt from all the lawsuits. The stock will be worth nothing on Monday even though as of the close on Friday (that day) you are $5 ahead. You fax CBOE and tell them no thanks, you no longer want to buy a stock for $10 that is worth $15 now but will be worth nothing on the open Monday. PS - Keep in mind, most brokers require you to notify them at least a day in advance if you are or are not going to excercise so read your contract. Only the big boys can wait till the last second. Lee

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