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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Dave Triplett who wrote (35351)	2/22/1998 9:07:00 PM
From: Patrick Slevin	Respond to of 58727

I cannot remember exactly. As I recall (from the Series 7 test) you have the "right" but not the "obligation" to exercise the options. My books are several years out of date and they were not for a ROP (Registered Options Principal) but lemme look.

To: Dave Triplett who wrote (35351)	2/22/1998 9:21:00 PM
From: Patrick Slevin	Read Replies (1) \| Respond to of 58727

It is unclear in the books (the books are for GP knowledge, anyway). I tried to reach a derivatives VP from Lehman that I know but he's not home. I think they made a mistake. Call them tomorrow and ask for the Compliance Officer at the branch. Don't talk to the broker or manager. Talk to the Compliance guy.

To: Dave Triplett who wrote (35351)	2/23/1998 12:16:00 AM
From: mozek	Read Replies (1) \| Respond to of 58727

Dave, Here's what's happening. I'm assuming that you bought Feb 35 puts. The options clearing house automatically exercises options that are more than 3/4 in the money. On Friday, you could have sold the puts or given instructions to not exercise them (bad choice since you'd lose the value). Since you didn't do either, the options were automatically exercised and you "put" the stock to someone at 35, leaving you with naked calls written. Your shares were sold at 35, not the current price. If you buy it below 35, which is not unlikely, you only lost what you paid for the puts minus the difference between 35 and your purchase price, maybe better than having your puts expire worthless. Your current situation is that you have written naked calls. I don't know what your option level is, but if you're at level II, you have a few choices. 1. You can buy the shares which will cover your calls. (level I) 2. You can buy the march calls back to close your position. 3. You can buy mar30 calls leaving you with a spread that will be profitable if CPQ closes somewhere above 34 in mar (Level II required and I'd have to look up the spread) This has risk of close to the spread difference (~4). 4. You can buy mar40 or 45 calls which will leave you in a bear spread which makes money if CPQ stays under 35 by march exp. This has risk of the spread difference (5 or 10). Based on Globex & Iraq news, I suspect we'll have an up day on Monday. While I'm not trying to make a recommendation, I'd probably buy the march 30 calls based on the fact that you were planning on leaving the calls outstanding until March. That way, you limit your downside to 5 points, and make the premium that you got for your mar35s a larger percentage on your cash out. Based on the chart, I'd be looking for a move to the near 32 range followed by a nice, solid rise. Since we may get a boost tomorrow, that prediction may be as good as a monkey throwing darts. If you do either buy the stock, which would be another excellent choice in my opinion, or the calls, I'd buy back the mar35s if CPQ approaches 32. Next time, I'd recommend closing your options position or giving your broker exercise instructions on expiration day. We all live and learn. Good luck, Mike