Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Sal D who wrote (1335)	3/2/1998 11:10:00 PM
From: Sergio H	Read Replies (1) \| Respond to of 29382

<1) Lets assume I do want to convert the call to shares and sell them immeditaly. Do I then need the 125,000.00 in my account to cover the purchase even though I will make 20,000.00 on the buy sell transaction. I think you already answered this but Im still not sure.> Joe, no. You do not need to convert to stock in order to cash in. <2) Lets say its close to the expiration date and there are no buyers for my calls at the 5.00 price. Does the issurer always have to buy them back from me or could I get stuck into having to convert them into shares and not have the money in my account to cover the purchase(I still dont know the answer to #1 above witch would clear this up) In other words if I want to sell the calls is there always someone who has to buy them back from me even if its a day before expiration or do I have to hope for a buyer. I hope you understand this question.> The market price is set by the intrinsic value + the time value and the volatility is factored in. In the example as we've discussed up to now, the only factor in the price of the option is the intrinsic value. If the strike price is 25 and the stock is at 30, the intrinsic value is 5. The intrinsic value you are guaranteed. The rest of the equation entails market pressures and is not guaranteed. Sergio