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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: P. Ramamoorthy who wrote (5708)	12/2/1998 12:30:00 AM
From: mooter775	Read Replies (1) \| Respond to of 27311

If you buy the stock at $ 10 and write the call for $ 3.25, someone pays you $ 3.25 for the option to purchase that same stock before June 1999 at $ 10.00. Your net investment is the $ 10 you pay for the stock less the call premium you receive ($ 3.25) or a net investment of $ 6.75. If the stock rises above $ 10, the stock will be called away from you, the option holder will pay you $ 10 for the stock on which he has the option. Therefore, you will receive your original $ 10 purchase price back. But since your investment on the day you wrote the call was roughly $ 7.00 (you receive the cash at the time you write the call position), you will have received roughly $ 3.25 on your net $ 6.75 investment (or $ 3 on the net $ 7 investment). By my calculations that is about a 42% gain for holding the stock and writing the call for that 7 month period.