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Technology Stocks : CMGI What is the latest news on this stock? -- Ignore unavailable to you. Want to Upgrade?

To: Sowbug who wrote (4567)	2/1/1999 7:12:00 PM
From: SJS	Respond to of 19700

You got it. OJ was the wrong addressee, I know. But no harm done, there. Selling puts is bullish, correct. You can sometimes (if you leg into a spread), sell your puts for more than it costs you to write the covered part (in equal amounts). Therefore, you have what is known as a credit spread, or one that pays you (vs costs you) to command the spread. It works something like this: Usually, you buy the higher price put and sell the lower priced one. IE, you would buy 10 CMGI 120 puts and sell 10 CMGI 110 puts, for a net cost to you to command this spread. You would like CMGI to close at exactly 110 with this example, so you don't get exercise on the 110's, but YOU could exercise the 120's. In any event the max you could make on this spread example is 10. With the stock at 130, let's say the 110 are selling for 3, and the 120's are selling for 8. If you executed the spread "legs" at the same time, you would be out 5 per contract (buy at 8, sell for 3, net out of pocket=5). Now look what happens if you get lucky and leg into the spread correctly (there's risk here!!) If you executed to sell side FIRST at 3, and then the stock goes up and you buy the long side for 2, your net is +1 in your pocket NO MATTER WHERE THE STOCK GOES TO....even 0. The hard part is guessing right if you choose to leg into a spread. If you guess wrong, the spread widens on you, without your ability to execute the other side in a timely manner. It therefore costs you more to do the spread than it would have originally. The mantra for option players is to command a spread for as little cost as possible, or develop a credit spread (ie, you get a "net" cost of + money, as in the last example). BTW, a credit spread is NOT selling the 120 and buying the 110's. Of course that will create a credit. But you've got 10 points of exposure there. It's complicated, but learning enough about spreads to execute them is very challenging and hopefully rewarding. Have fun!!