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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Tom K. who wrote (108684)	3/10/1999 9:08:00 AM
From: edamo	Read Replies (1) \| Respond to of 176387

tom k......typo...should have read dell 01 120 zdemd now 01 60 which i believe now zdeml...my fingers not always as adept as my thoughts!! if you guess wrong...more premiums....always! lets take the dell 01 120, now 01 60....every may unless leaps stop trading the next year expiration is traded...the inherent quality of an option is a higher premium for a further expiration for the same strike...this is the time decay feature of the option premium...it normally moves in a smooth downward line until the last six months of the contract...e.g. in post split terms...01 60...premium 26....common @ 41.25(these are actual split adjusted numbers for 2/17)....if the stock put to you in jan 01 your cost is 34....if the stock is flat until that period the option would expire with a value of 18.75 (60-40.25)...so worst case you have a 7.25 profit...the 02 and 03 60 would have a premium much larger than 7.25... dell at this time not the best for "real" examples due to split and changing of symbols...lets use intc.. intc apr 150 inqpj @ 31.625 intc jul 150 inqsj @ 32.875 intc jan00 150 lnlmj @41 intc jan01 150 znlmj @ 42.875 the closer you get the more the premium moves +/- par with the common..if you get caught in a losing position you can cover by selling a further expiration as above..taking a short term tax loss and getting a premium from $1 to $ 11 per contract...the beauty of leaps is the time factor...let them run till near expiration when they expire worthless or you can roll out to the max... i've tried to be simplistic, fully conversant with black scholes which is the math model to set pricing...not necessary to use because you have to make assumptions of market direction and volatilty...i'd rather not assume and let the market shout to me the factors..i.e..10/27/97, 10/8/98, 2/17/99...the market sold off shouting "sell puts"... basic rules never to violate 1) have the capacity in cash or margin to accept the put 2) only sell puts in that which you desire to go long and long term this is not a trading strategy, but a very profitable hedge, and gives income and portfolio growth...