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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: hpeace who wrote (11705)	12/18/1997 4:28:00 PM
From: Resry	Read Replies (1) \| Respond to of 97611

Steve, I've been following your posts on options but fimd myself still confused. Could you explain the reasoning behind this plan. Under which scenarios would this work out to be a profitable trade? Thanks. Note - Already long CPQ and intend to stay, but interested in trading as well.

To: hpeace who wrote (11705)	12/18/1997 4:54:00 PM
From: Richie	Read Replies (2) \| Respond to of 97611

Steve, This strategy confuses me just a little, so correct me if i am wrong, Sell Jan 55 put = 4.25 Buy Jan 50 put = 2.5 ___________________ Difference = 1.75 Okay......then lets say the stock is 65 at the end of January..... this means that the Jan 55 put is worthless, so is the Jan 50 put.....then the difference is the portion that you have pocketed... or 175 dollars per contract. correct? On the other hand.....let us say that the stock closes at 50, 3rd Friday in January......then the 50 put is worthless and the 55 put is worth 5 thus, 5 - 1.75 = 3.25 (loss) correct? The key here would to be buy the 55 put back at some point when its close to what you paid for it, if the stock is mired in this range? Thanks in advance RichieH The only problem that i can see with the bull spread is that it limits your upside gain, and of course the positive side is that its only a loser if it closes around your "put" strike price, correct?