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

To: Andrew who wrote (48633)	2/17/1999 3:21:00 PM
From: Jimbo Cobb	Read Replies (1) \| Respond to of 97611

I assume you own the LEAP calls ... You can either buy or sell calls or puts...you don't have to own the stock to do either... If you think CPQ is going to go UP, you would want to either buy LEAP calls or sell LEAP puts... Jimbo.

To: Andrew who wrote (48633)	2/17/1999 3:29:00 PM
From: Night Writer	Respond to of 97611

Andrew, I own two contracts of CPQ 30 LEAPs, expiring in 2000. Nice buy. You have to be happy with that ones. Please get a book on options and read it. Selling uncovered or naked calls and puts are very different from selling covered calls or buying calls and puts. The following clippings from CBOE and should help you get an idea why you need to read a book. The italics are mine. I still go back and study the book I have and rediscover important points. Also your have to be cleared by you broker to trade uncovered options. It could be hazardous to your financial health. They have special forms you have to sign before they will place an order for you. NW Options are contracts in which the terms of the contract are standardized and give the buyer the right, but not the obligation, to buy or sell a particular asset (e.g., the underlying stock) at a fixed price (the strike price) for a specific period of time (until expiration). To the buyer, an equity call option normally represents the right to buy 100 shares of underlying stock, whereas an equity put option normally represents the right to sell 100 shares of underlying stock. The seller of an option is obligated to perform according to the terms of the options contract-selling the stock at the contracted price (the strike price) for a call seller, or purchasing it for a put seller-if the option is exercised by the buyer. All option contracts trade on U.S. securities exchanges are issued, guaranteed and cleared by the Options Clearing Corporation (OCC). OCC is a registered clearing corporation with the SEC and has received 'AAA' credit rating form Standard & Poor's Corporation. The 'AAA' credit rating corresponds to OCC's ability to fulfill its obligations as counter-party for options trades. The price of an option is called its "premium." The potential loss to the buyer of an option can be no greater than the initial premium paid for the contract, regardless of the performance of the underlying stock. This allows an investor to control the amount of risk assumed. On the contrary, the seller of the option, in return for the premium received from the buyer, assumes the risk of being assigned if the contract is exercised. In accordance with the standardized terms of their contracts, all options expire on a certain date, called the "expiration date." For conventional listed options, this can be up to nine months from the date the options are first listed for trading. There are longer-term option contracts, called LEAPS, which can have expiration dates up to three years from the date of the listing. American-style options (the most commonly traded) and European-style options possess different regulations relating to expiration and the exercising of an option. An American-style option is an option contract that may be exercised at any time between the date of purchase and the expiration date. Conversely, a European-style option (used primarily with cash settled options) can only be exercised during a specified period of time just prior to expiration. PUT OPTIONS The buyer of a put option has purchased the right to sell the number of shares of the underlying stock at the contracted exercise price. Thus, the buyer of one ZYX June 50 put has the right to sell 100 shares of ZYX at $50 any time prior to the expiration date. In order to exercise the option and sell the underlying at the agreed upon exercise price, the buyer must file a proper exercise notice with the OCC through a broker before the date of expiration. All puts covering ZYX stock are referred to as an "option class." Each individual option with a distinctive trading month and strike price is an "option series." The ZYX June 50 puts would be an individual series. cboe.com