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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: Madpinto who wrote (1507)	7/8/1999 4:39:00 PM
From: Mark Z	Read Replies (1) \| Respond to of 2241

What your suggesting isn't that far-fetched at all. Last April, ELNK ran up to 90+ on the Monday or Tuesday before option expiry - right before their earnings report - and by Friday it was back to the mid-60s. In another situation last month, I did exactly as you suggested. I was long some CMGI 90 calls and the stock was hovering around 100 near the close on option Friday. I didn't want to risk a gap, my calls were only worth about $9 so I went short CMGI at around $100 and let my calls cover the short. As it turns out, with my broker, even if the CMGI calls had been worth $10, this would have been the better move. Stock trades (long or short - including option exercises) are $29 regardless of # of shares involved. So I paid 2 $29 commissions (1 to short, 1 to exercise calls to cover short) whereas just selling my calls would have cost me around $120 given their option charges are based on # of contracts and the value of the transaction. As it also turns out I should have risked the gap 'cuz CMGI gapped up the following Monday <g>. With this quarter's ELNK, I legged into a spread this afternoon, selling July 60 calls when ELNK hit 70. If ELNK runs up to 80, I'll initiate puts. Its pattern is to run into earnings and then fall - sometimes hard - thereafter. And if I'm wrong, well then the stock runs and I lose my 'insurance'. But I have this nagging feeling the fed is due to trot out one of their governors next week to say something about 'inflation vigilance' to spook the markets before option expiry next Friday.