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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: CCWriter who wrote (30783)	8/11/1998 1:20:00 PM
From: SecularBull	Read Replies (2) \| Respond to of 97611

blaine, not correct. If you're long in a stock, and you want to sell, selling covered calls to lock in your gains isn't a bad strategy at all. Let me explain. In Goldman's case, they own x number of shares long (hopefully not too long in the case of Compaq, or they're upside down). They sell covered calls for August 98 at a strike of $30. Let's say they received $6 in premium per share for the calls. That means they're out at $36 when the option is called, no matter where it is trading at August expiration (unless it is below $30, and then they wouldn't get called. I don't think it will be below $30 then). Now Goldman is either betting on being called, and being out at a net of $36 per share, or the stock dropping to below $30 by August expiration (a highly unlikely scenario), not being called, and pocketing the premium. It's either bearish, because they're locking in their net at $36 and getting out, or because they expect the stock to tank in the very near term. In either event, their position is not very favorable towards CPQ. Regards, LoD