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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: ---------- who wrote (666)	2/7/1998 5:56:00 AM
From: Tim Fierro	Read Replies (1) \| Respond to of 2241

Doug, I appreciate the response back, it helps to see that I am somewhat on course in learning how it works. I did find it interesting though that, Finally, I will relay a real experience. I had an option expiring that was $1 in the money, (I mean expiring in LESS than 15 minutes!) The bid was only 3/4. I couldn't get filled at $1. It made me SO MAD, I would like to know why you held it this long. I am sure you must have known that it would expire soon and you would get nothing. Was it a smart play you were hoping for that didn't turn out the way it was planned, IE: The $1.

To: ---------- who wrote (666)	2/11/1998 6:21:00 PM
From: Tim Fierro	Read Replies (2) \| Respond to of 2241

Since you helped me out in making sure I understood some basic concepts, I thought I would use your message back to me and see if you can help clarify something here. 02/10 Buy CAGIG Sep 35 B: 1-5/8 A: 1-7/8 $ 12.00 Trade Charge $ 30.00 $3 per contract for 10 contracts (1000 shares) $1,875.00 1000 @ 1-7/8 for the options ------------------ $ 1,917.00 Total charges 02/11 Sell CAGIG Sep 35 B: 2 A: 2-1/4 $ 12.00 Trade Charge $ 30.00 $3 per contract $2,000.00 1000 @ current bid --------------------- $1,958.00 Total cash from sell This gives us a $41 profit in 24 hours. Is my assumption that 'if' the price of the stock continued upwards, the option price would follow in some % in the same direction and I would have picked a good day to buy this option. I use the above because when I saw ConAgra go down like it did yesterday morning, I thought this would be a good time to buy an option because 1) I knew it will come back today and 2) that $35 in my mind is not that far off for this stock in September; IE: Safe Bet in my mind. So if I played it above, that is the way to play options; do I understand pretty good now? Now for the part I don't understand the logic behind. While I am betting that the stock will increase before my time period and reach the price, there were 400 contracts sold today for March 30's. Why does someone buy the 30's today instead of yesterday? Ok,that is hindsight and maybe they bought this moring and not the close, but how is buying the 30's for (nope, they did buy at 3-1/8 in the afternoon); anyway, how is buying an option for 3-1/8 profitable when the stock is selling for 32-11/16? I know I am missing something and it is probably some special strategy somebody is playing, but since I have been watching this stock for the past 2 days, I wonder how it could be a better proposition than buying a stock with an option strike higher than current price, not lower. If they had bought yesterday, they would have about the same amount of upswing in option price as I did. Tim