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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: TGPTNDR who wrote (28788)	2/17/2001 2:39:50 AM
From: Petz	Read Replies (1) \| Respond to of 275872

TGPTNDR, That's a very good question, "Why buy back covered calls if they are right at or slightly out of the money?" Normally, one would expect no one to exercise an out-of-the-money call. AMD closed at 29.71. First, there is a slight chance that some news could come out prior to Saturday's drop-dead expiration time which would cause someone to exercise. You say, "What do you mean, 'Saturday expiration' -- my broker makes me decide by 5PM Friday if I want to exercise?" Well, some people who are holding calls can decide until sometime on Saturday whether they want to exercise. I used to read the "Striking Price" column in Barrons regularly and there were often stories about takeovers announced on Monday and out-of-the-money calls being exercised prior to the official news. While I would be happy to be able to sell half my shares at $40 on Monday due to some great news, I'd be even happier to be able to sell ALL my shares at $40. (BTW, this last sentence is absolute proof that I am not the same person as niceguy. <g>) In my particular case, the commision for buying back half a dozen calls was only $12 and the cost $5 each. At 3:55 the stock shot up to about 24.80. I figured it was a ruse to get covered sellers to buy back, so I only offered to buy at 0.05 (bid 0, ask 0.15). Another reason is that by buying back the calls I won't forget to include the gain on my taxes. And I don't believe either Turbo Tax or Tax Cut handles option expirations properly on Schedule D or D1. You are supposed to write in "expired" in the "COST" field for an option you wrote which expires worthless, but all the tax programs choke on this. <RANT>Why do all the tax programs insist on giving you only about a 12 character field for describing a security? Why don't discount brokers generate a list of gains and losses for you? Sheesh, the tax programs should also know about index options, which ones have to be listed on schedule 6781, be able to recognize spreads, etc., etc. </RANT OFF> Petz