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Strategies & Market Trends : Z PORTFOLIO -- Ignore unavailable to you. Want to Upgrade?

To: Ron McKinnon who wrote (1626)	5/2/1998 2:27:00 PM
From: DanZ	Respond to of 11568

PAUH calls. Ron, The PAUH May 12.5 calls closed at 2 1/2 x 2 7/8 and the stock closed at 15 1/16 x 15 1/8. For the Z port, we can do one of two things: 1.) Close both positions: sell the stock at 15 1/16 and buy the options back at 2 11/16 (should get filled at that price even though they are asking 2 7/8 because they are deep in the money and there is plenty of stock for sale at 15 1/8. 2.) Let it ride until expiration and let the stock be called away. The benefit of option 1 is that it would free up cash for other purchases. The benefit of option 2 is that we won't lose the 1/8 or 1/4 in the option spread because if we let them expire in the money, then we don't have to buy them back. If you want to let it ride, then we have a loss of 2 1/2 per contract on the option (sold it at 3/8, currently asking 2 7/8), for a loss of $11,250.00 and that should be in the spreadsheet instead of the net proceeds. The other way to do it is to set it up similar to an equity position instead of just putting the original net proceeds in the last column. Sorry for the hassle. Covered calls don't always work, but sometimes they do...as in my VLSI position. You win some and lose some. Just do whatever you feel is best, or if you don't care, then I would let it ride for a bit longer..we have plenty of cash right now. Another option, which I don't recommend for the Z port, is to sell the stock and let the option ride. I did this in my personal account on Friday but it's very risky because I now have a naked short position on 45 in the money calls. Effectively, I'm short 4500 shares of PAUH and the stock is in a big uptrend. There are a few options that I'm considering for next week. 1. Buy the May 12.5 calls back to close my short option position. 2. Buy May 15 calls to protect myself in case the stock continues to rally. They closed at an asking price of 13/16 on Friday. 3. Don't do anything and hope that the stock sells off. The reason that I sold my stock and didn't buy the option back is because it has made a huge move recently, there were far more blocks on Friday than normal with no upwards movement (looks like distribution), and the stock is trading at the 15 strike price with only a couple of weeks until expiration. I can't imagine that the May 15 calls will expire in the money but we will see.