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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Marc D. who wrote (7052)	3/7/1998 4:56:00 PM
From: mc	Read Replies (1) \| Respond to of 14162

Marc, your first guess was correct. As the stock holder, you would get the .2 shares of the other company and the options would be adjusted to reflect the new underlying security. It works the same way for stock splits, the options just get adjusted so that the math all works the same. Look at IOM options, it split recently and you'll see odd strikes of 11.75 that were 22 1/2 before the split. So, you're 20 shares of ABC at $100, which used to be 100 shares of XYZ at $10, will be called away from you at expiration (provided ABC is still at $100) at an adjusted strike price of $50 yielding you $1000 just as if the 100 shares of XYZ at strike 10 were called from you, which would yield $1000. Good luck, Gary