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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (67909)	5/18/2005 10:18:46 AM
From: GVTucker	Read Replies (1) \| Respond to of 77400

mindmeld, RE: Uncovered options are riskier, which means they carry a premium to covered calls. Isn't that right? No, it isn't right. A call option is dependent on the volatility of the underlying stock, the time to maturity, and the risk free rate of interest. It makes no difference whether or not the call is covered or uncovered.

To: RetiredNow who wrote (67909)	5/18/2005 10:58:06 AM
From: Elroy	Respond to of 77400

Maybe you are right. But then an uncovered call option that they'd be buying would be different than the covered call option they typically give an employee. Uncovered options are riskier, which means they carry a premium to covered calls. Isn't that right? No, whether a call option is "covered" or not has no affect on its price. A "covered" call is when you sell the CSCO call option AND hold CSCO stock. Therefore, if the option gets exercised and you have to deliver the stock, you don't have to buy it (you already own it), and just deliver the stock you already own.

To: RetiredNow who wrote (67909)	5/18/2005 10:59:04 AM
From: Elroy	Read Replies (1) \| Respond to of 77400

Maybe you are right. But then an uncovered call option that they'd be buying would be different than the covered call option they typically give an employee. Uncovered options are riskier, which means they carry a premium to covered calls. Isn't that right? No, whether a call option is "covered" or not has no affect on its price. A "covered" call is when you sell the CSCO call option AND hold CSCO stock. Therefore, if the option gets exercised and you have to deliver the stock, you don't have to buy it (you already own it), and just deliver the stock you already own. You can't buy a covered call. You sell covered calls (if you own the underlying security).