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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: BDR who wrote (771)	5/23/2001 11:19:01 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 5205

>> Fidelity quotes give me 4.30 X 4.40. and you have 4.20. Hmmm. Must be different exchanges? You bring up an important point. Options are traded at 5 exchanges in the USA, Chicago Board Options Exchange American Stock Exchange NYSE Options & Index Products Pacific Stock Exchange The Philadelphia Options Exchange and there can be surprisingly large variations bids, asks, and spreads offered in the case of a fast moving option. Some brokers supply quotes based on one exchange, while others, like Fidelity, provide composite quotes (the highest bid on the 5 exchanges paired with the lowest ask on the 5 exchanges). If you place a market order with no instructions, your broker will route the order to the exchange of their choice - the one where they have an agent or the lowest contracted cost. In the case of my broker, Fidelity, undirected orders default to the cboe, but if I am trading 10 contracts or more I have the right to direct the order to the specific exchange offering the most favorable price. In order to do this I need to get a quote from each exchange through my rep, and have to place your order through him, not on line. The broker fees are higher, but in some cases the price differential justifies it. Since all of this varies from house to house, I'd suggest everyone check with their own broker to find out their specific system. duf

To: BDR who wrote (771)	5/24/2001 3:28:26 AM
From: JohnM	Read Replies (2) \| Respond to of 5205

How so? Called at 10 plus even with only the 4.20 premium gives you 14.20 and it cost you 14.03. Hmm, let me give you the full calculation. I simply copied McMillan (and may well have fouled that up). I bought two contracts for a total of $2806; commission was $15; that equals $2821 in cost. The premium for the 10s would have been $840, subtracted from the $2821, leaves out of pocket costs of $1966. Then commissions for writing the options were $20. That leaves a net investment of $1986. If the option is exercised that produces $2000, less the $15 commission for $1985. I see a loss of $1!! Ouch, looks like neither one of us was correct. I simply did a quick reading of the numbers and found they looked negative and thus fired off a much too hasty post. Clearly, at least with these numbers, it's a wash. Have I done something wrong? John