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

To: SecularBull who wrote (30784)	8/11/1998 1:33:00 PM
From: Dr. Id	Read Replies (1) \| 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. This is extremely simplistic. Read McMillan, then try to discuss option strategies. Your previous post (the blank one) was your best thusfar.

To: SecularBull who wrote (30784)	8/11/1998 1:51:00 PM
From: CCWriter	Read Replies (2) \| Respond to of 97611

LOD, I propose Goldman is playing the volatility of the stock. I see CPQ in a long term uptrend with a short term trading range between 36 and 32 1/2. They sold the covered calls when the stock price was near 36 (at a price of say $6 per contract). I'll bet they buy them back when the stock price approaches 32 1/2 (at say ~ $3 per contract). Then they will do it all over again when they feel the stock price has reached another short term peak. Lots of ways to play the market. blaine