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Biotech / Medical : PFE (Pfizer) How high will it go? -- Ignore unavailable to you. Want to Upgrade?

To: ratan lal who wrote (2480)	5/14/1998 6:18:00 PM
From: Caroline	Read Replies (1) \| Respond to of 9523

I play options but I admit this over my head. If you get called at 110 (very likely), you've done well on the two parts making up a covered call. You're still obligated to buy (sell put) at 110. So you've effectively reduced that buy's basis to 110 minus put premium? Thx, cb

To: ratan lal who wrote (2480)	5/15/1998 11:28:00 AM
From: Ally	Read Replies (1) \| Respond to of 9523

>>All Pfe'rs I would like your opinion on the following trade: Buy PFE at market today 109 1/2 SELL Dec 110 call about $14 1/2 SELL Dec 110 Put about $11 1/2<< Ratan, here's my view of the above combination..... I think a combined option strategy should be similar in technique to a single option strategy.. i.e. be based on a certain view point (bullish, or bearish) of the underlying security at expiration time. Assuming that you're starting the strategy (without owing existing stock presently), then the view point of PFE will be bullish (otherwise, why do this combination, right?) The covered call at $110 is a bearish strategy, while the naked put is a bullish strategy.... so, it is somewhat contradictory. I would be more aggressive and refine the combination to selling the covered call at strike price $120 Dec for $9 premium based on the viewpoint that PFE will close above $110 and below $130 by Dec. Keep the naked put strike price (very conservative) to $110. By this refined combination, you'll end with an a fairly aggressive strategy (write call at $120), and highly conservative strategy (deep naked put), which should give an overall strategy more in line with the bullish viewpoint. The icing on the cake with this refined combination is the higher probability of keeping the stock for yet another play. Thoughts?