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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: ratan lal who wrote (13556)	12/19/1997 12:08:00 AM
From: Amir Desai	Respond to of 70976

ratan: you say, shouldn't I just hold the stock if I guess its going to $45. My answer is no, because it is a guess. Nobody on this thread really has any clue where AMAT will be, especially me! Also, I need immediate gratification. Taking in $10K with another $18 K potential is good enough for me. << and that the premium in the LEAP by then will evaporate to $2 to $3. I probab;y end up buying it back. >> AMAT has already gon up $10 from your Strike price. SO you can buy it back for $10+time value ($3??) = $13. You would have been better off not selling the CC. you forget to realize that you keep the price increase in the stock when you buy back the call. If AMAT were the go 10 to 15 bucks above the stock price the premium in the options goes down. For example, when I executed this transaction earlier this week: AMAT = $26.125 35 99 = $5.125 If AMAT = $45 35 99 = $13 to $15 (therefore, what I call premium = 3 to 5 bucks) Why does the premium evaporate? Time and because the option gets significantly in the money.