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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: Jason Cogan who wrote (9073)	3/27/1998 1:35:00 PM
From: Steve Robinett	Read Replies (1) \| Respond to of 13594

Jason <<When writing a call, the investor knows the price of the short, but in actuality, the amount of shares remains uncertain. At higher prices, the investor is short the full amount of the contracts. At lower prices, it's as if he shorted fewer shares. How many fewer? >> One call equals 100 shares. If you write the call and get exercised, you have to come up with 100 shares per call. There is no doubt about this. I think what you're doing is confusing delta--the rate of change of the option's price for a given change in the underlying issue--with the number of shares the option represents. A typical at-the-money call has a delta of about $.52, that is, it moves $.52 for every dollar move in the underlying. Delta, of course, changes the further away you are from the money (gamma). A true synthetic position behaves almost identically to the real thing. Buy a put, write a call and the position is identical to a short position less the option's bid/ask spread. Best, Steve