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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Denice who wrote (38706)	12/8/1998 10:55:00 PM
From: Skeeter Bug	Read Replies (1) \| Respond to of 132070

denice, that's about it in a nutshell. i'd add that expiration is always the third friday of the month. mike is betting that csco is below $70 on or before the third friday in april. if an option is out of the money (at or above a strike price for a put or at or below a strike price for a call) then what you are buying is 100% time value. intrinsic value is the amount an option is in the money. ex, if csco goes to $65 then mike would have $5 of intrinsic value. if the put was trading for $7 then he'd have $5 intrinsic and $2 time value. if csco were to fall to $70 tomorrow then mike may even sell and turn a very nice profit very quickly. so, the put never had any intrinsic value and a high % return can still be made. time value is perception. if people perceive future volatility then time premies go up. if they don't then they are cheaper. if you hold until expiration then you only make intrinsic value as all time value has eroded. if there is no intrinsic value then what you have left and $0.50 won't buy you a starbucks coffee ;-) my only caveat is that a risk reduction strategy is NECESSARY and mike's is very good if you can afford it. otherwise, broke might become a state of being ;-) good luck.

To: Denice who wrote (38706)	12/9/1998 10:04:00 AM
From: Knighty Tin	Respond to of 132070

Denice, Just one mistake. I am not buying Cisco. I bought puts on Cisco. That gives me the right to sell it to somebody else at a set price, even though I don't own it. The concept being, I can buy it for less than $70 later and sell it to a put seller for $70. Of course, that extra step never or hardly ever happens, as the put price reflects that equation. The main thing is, I do not own Cisco stock, just a put to stick it in somebody else's portfolio should I so desire. MB