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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Maryann M who wrote (30475)	4/1/1999 5:33:00 AM
From: SMALL FRY	Read Replies (1) \| Respond to of 120523

Maryann, If I may... I am going to assume that you are cognizant of the differences btwn CALLS and PUTS... Buy to open / Sell to close are paired up; as are Sell to open / Buy to close. 1. Buy to Open - used to buy option contract(s). Buying to open a Call option is a long position, while buying to open a Put position is a short position. (When executed the number of contracts are then added to Open Interest column that you see in CBOE option listing) **Sell to Close - used to close option contract(s) to satisfy and terminate the above position. (Subtracted from Open Interest) 2. Sell to Open - used to sell option contract(s). Selling to open a call option is a short position, while selling to open a put option is a long position. ** Buying to close - used to close option contract(s) to satisfy contracts sold to open above. IMO until one have gained more experience in option transactions, one should limit one's self to the pair in #1 above. #2 is a bit tricky since it may involve holding the underlying stocks to consummate unless you want to do "naked" transactions which is a bit risky. I recommend seek assistance from your agent/broker to open your first option transaction... then you can close it yourself on-line. Once you feel a bit more comfortable, on-line trading is the only way to go for the commission conscious investor. A word of caution... options are not as liquid as stocks and bid/ask spreads are unbelievably designed to send the broker and market maker's whole family to college all the way to a doctorate degree.. <g> Bid/ask spread may be as wide as $3 depending on the underlying stock's volatility. To get a warm fuzzy that you are bidding close to a fair price, and not the balooned price driven by over anxious investors, use the options calculator in CBOE... you'll find everything there including the volatility index of stocks. Hope that helped... Good luck, SF

To: Maryann M who wrote (30475)	4/1/1999 7:04:00 AM
From: gaj	Respond to of 120523

options - i would add to hoffy's suggestion that, as a rule, you purchase options which are "in the money" - that is, where the stock price is already higher (on calls; lower on puts) than the strike price. you have less reward if it explodes, but significantly less risk involved. the only exception is if a stock looks like it will explode in the next day or two; for example, when gnet's trading was halted, and they opened up (b/c of paul allen's deal), the stock pulled back from 107ish to 100. i felt the stock would continue a significant uptrend the next 2 days (b/c company, float, news) and bought 110 calls. they also happened to be priced right... i'd suggest asking options jerry for pointers...you might be able to guess from his name what he likes trading in... (btw, i've been trading options for 2 years, and have only done buy to open / sell to close. i don't feel comfortable selling open options, though people have shown it can be a good risk hedge).