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To: Ira Player who wrote (3312)	11/6/1997 1:18:00 PM
From: Jonathan Edwards	Read Replies (1) \| Respond to of 10921

A short note on tax issues. If you write a covered call against a stock that is eligible for LT capital gains treatment and it goes into the money, don't let it get called. If it gets called, you have a ST gain via the premium and a LT gain at the call price. You pay tax at you marginal tax rate on the ST and 20% on the LT. This is incorrect. If you sell a covered call that is exercised, the premium is added to the amount realized from the sale of the stock and the entire gain (option premium plus call price less basis) is LT. See IRS Pub 550 page 55 under "Writers of Calls and Puts".

To: Ira Player who wrote (3312)	11/6/1997 9:09:00 PM
From: LLCF	Respond to of 10921

<The premiums on options, I believe, are reasonably reflected using the Black-Schloles (Spelling?) methods, when the market is not seriously turbultent. > Black Scholes is a pricing model...gives you fair value of an option given certain assumptions that YOU input (volatility measures, interest rates, etc)...turbulence is exactly WHY you use options and doesnt affect the usefulness of the model. <The implied volitility they represent are highter than they were several years ago (or so I've read, I wasn't "in it" then), but so is the real volitility.> Although this is true "at the moment" it wasnt till a few weeks ago...the actual volatility of the S&P has steadily gone down in the past 15 years as the market rose. DAK