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

To: Kenneth R Miller who wrote (12596)	1/3/1998 12:41:00 AM
From: Night Writer	Read Replies (3) \| Respond to of 97611

Ken, Broker should let you sell covered calls, buy calls, buy puts. This can be done with no special documents signed due to limited risk to brokage house. He should not let you sell naked calls, or puts unless you have the capital to cover them. The reason for this is to protect the brokage house from possible liabilities should you not be able to cover your transactions. You have to read a phamplet, and sign a document stating you understand options and the risk involved to sell naked calls, or puts. Does your broker trade options? It is my understanding that not all brokers trade options. Is your broker strongly advising you not to get into options because of the risk, or basing the decision on your assets? Different brokerage houses have different policies on what is acceptable. If you don't keep your stocks, bonds, and cash in a brokerage account so they can cover your transactions, they normally will not trade options for you. Hope this helps. My broker advises selling covered options when the market is slow, and sometimes when it is not so slow. His advise is not always good in my opinion. In fact, I have bought stock and sold a covered option the same day to reduce the stock cost. If it was called away, I made a nice profit and moved on to another stock. I don't do this with CPQ. Bet your broker would let you sell a call on CPQ shares you own or buy. For example. Buy 100 shares of CPQ at 60 and sell 1@July call at 70 strike price for $6. Reduces you per share price to a little less then $54. If its called away you made money. If CPQ price drops, and you sell stock, you have to close out the call position. No real risk to brokerage house. Anybody feel free to correct this note if I am incorrect. Hope this information helps. NW