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

To: JohnM who wrote (3726)	5/7/2002 5:15:40 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 5205

John, Unless you are talking about big numbers of contracts you want to buy or sell all at once, a good indication of the ease of selling back is the bid ask spread. If you believe the stock is going to move more than well enough to cover the bid ask spread, plus the loss of premium due to time passing, then buying the calls makes sense. I took a quick look at the GMST options. The spread seems to be typically .20 near the money. That is not too bad, but it it will be wider if whatever you buy goes well in the money. The strike 5 calls now are around .40 spread for any one exchange. That will get even wider if they get up around $10 ITM. The good news is, GMST options trade on all 5 exchanges, and that competition will help keep the spread from getting too wide. The open interest is substantial, so I expect if the stock does start ot lift the volume will increase as well. Dan

To: JohnM who wrote (3726)	5/8/2002 1:46:12 PM
From: Kayaker	Read Replies (1) \| Respond to of 5205

Given that the volume is quite low as compared to say, QCOM, am I likely to have an unusually difficult time selling back my calls? Should I, thus, look to stocks with higher option volume? My understanding of options --> Options are derivatives. They don't exist in the same way that company shares do. They are created and destroyed by the market maker (?) as required. He sells you, or buys from you the option contracts and then does an offsetting transaction to zero out his risk. If you buy or sell option contracts there is unlikely to be a retail investor on the other side of the transaction. So, as I understand it, it makes little or no difference what the volume is on a particular put or call. You can pick an option with no 'volume' and no 'open interest' and do whatever buy or sell you want. Option orders where there is higher volume may move more quickly or have better spreads, but I'm not sure on that. Again, that's my (limited) understanding of how it works.