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

To: the options strategist who wrote (1517)	7/9/1999 11:34:00 AM
From: Mark Z	Read Replies (1) \| Respond to of 2241

JJ - First, who says I'm bullish <g>? Please see my msg #1512. I fully expected ELNK to dip after earnings which come out the middle of next week (actually, I was wrong - it started dipping before earnings - down in the 67's now). What selling the calls does is effectively 'lock in' a $71 sale price for me provided ELNK doesn't dip too far below $60 in which case my sale price is $11 over that. It also caps my gain but I don't think ELNK will be over $70 at next Friday's close so I'll take that risk. The time premium ($1 + change) in the calls I sold more than offset the commissions/cost of selling the calls. That's a key for me. Its 'cheap' to have the broker exercise the options. If I'd just sold my long side, the commissions for that transaction alone are more than the commissions for 2 exercises. In fact, with my broker, I can do 4 stock trades (exercises are considered stock trades) for what it costs to do 1 option trade. So, between add'l premiums + commission savings, I can make about $100 more per contract by doing it this way. I have yet to initiate the puts. I was holding on for that in case ELNK ran up towards 80. It didn't, or hasn't, so they're not in play. Finally, why sell calls/buy puts over just shorting? Leverage. Plain and simple. I don't want to tie up the cash/buying power I'd need to tie up to go short that many shares.