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Technology Stocks : CMGI What is the latest news on this stock? -- Ignore unavailable to you. Want to Upgrade?

To: Topannuity who wrote (12663)	8/21/1999 3:20:00 PM
From: PLeaps	Read Replies (1) \| Respond to of 19700

Options are quoted as 1 contract = 100 shares. SO If you buy 100 shares at 80, you will spend 8,000. Then if you sell 1 contract for Jan.'s expiration and collect $7 per contract, that is 7 x $100 or $700. Total cost is $7300. If you want to collect $7,000 on the sale of options, you would have to sell 10 contract or equal to 1,000 shares. You do not want to do this since the share price may rise much higher then 80 and you would have to deliver 1,000 shares at the expiration of your contract (but you have only 100 shares in position to deliver). If you want to try this strategy buy the 100 shares of stock for 8,000 then sell a covered call that is "out of the money" (Strike price of 90 or 100). You will receive less money on the sale of the call options but if the stock rises you receive to 90 or 100 you receive $9,000 or $10,000 if you get called away.

To: Topannuity who wrote (12663)	8/21/1999 6:29:00 PM
From: Jill	Read Replies (2) \| Respond to of 19700

That's risky because your stock will probably get called away, so you actually end up losing $ on the play you mentioned. You want to pick a strike price where if the stock gets called away you lock in a certain percentage (by writing a call, you are signing a contract that allows somebody else to buy the stock at that price on options expiration day. For that agreement, they are "paying" you the premium.). CMGI has been in the doldrums for awhile now but mostly in the 80s. Sometimes people write covered calls (which is what you're talking about) because they are pretty certain the premium will expire worthless, i.e. they'll get to keep the $. Check out Uncle Frank's recent posts--he owns Qualcomm, and recently sold covered calls, 165's, for which he got a premium of 4, in his IRA. He didn't think Qualcomm would run up that fast in the next few weeks, but it did--it closed yesterday just under 175. So his stock gets called away and though he makes a percentage gain (I believe it was about 9%) the play was not as profitable as holding onto his stock or else writing a higher call (as PAL did, he wrote 175s, so kept the premium.) Volatile stocks have higher premiums; CMGI is very volatile and has rich premiums. A nice book for understanding options is Harrison Roth's LEAPS. It's about LEAPS obviously but will make all the options strategies clear without too much technical goo-ga.