Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Options Box -- Ignore unavailable to you. Want to Upgrade?

To: eric deaver who wrote (9477)	2/8/2001 1:23:44 PM
From: Poet	Read Replies (1) \| Respond to of 10876

Hi Eric, Long time no see. :) This means an "at the money" call, or a call whose strike is close to the current price of the stock. In JF3's example, NTAP is now trading at $35 1/2 The Feb 35 call (NULBG) is about $3 1/2 at the bid. He was thinking of buying NTAP shares and (I suggested) immediately selling calls against his shares (also known as writing covered calls) for $3 1/2. This reduces the cost of the stock to $31 1/2 per share, as he'd take in $ 3.50 per share in premium from selling the calls to someone else. If NTAP ends up being less than $35 per share at option expiry (next Friday), he keeps his shares and the premium he collected. If NTAP is above $35 at the close next Friday, his shares are called( automatically bought from him) at $35 per share. I hope this helps.

To: eric deaver who wrote (9477)	2/8/2001 2:35:44 PM
From: hobo	Respond to of 10876

adding to Poet's comments: ATM = at the money (strike price is at the market price of the underlying asset) applies to both calls and puts Value of the premium is "time value" OTM = out of the money (for CALLS: strike price is above the market price of the underlying. for PUTS = the strike price is under the market price of the underlying) Value of the premium is "time value". ITM = in the money (for CALLS: strike price is under the market price of the underlying. The difference is the amount by which the option is "in the money". for Puts: strike price is above the market price of the underlying asset. The difference will be the amount by which the option is "in the money"). Value of the premium will be the sum of "time value AND Intrinsic value i.e. the amount by which the option is "in the money" as per above examples.