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Dear Ray,
You mention Option Express...I went there in the beginning and
punched in for the C chain. Believe it or not, it did show the hodgde
podge Call...inconsistently...which I thought was based on low volume.
Sincerely,
John
------------------ Reply Separator --------------------
Originally From: "Ray Raffurty" <r.raffurty@xxxxxxxx>
Subject: Re: [RT] Re: Fedback-This Week's Most Unusual Covered Call
Date: 03/08/2003 05:59pm
Correction: The cash in lieu of 0.30422 share of Travelers Property
Casualty Corp. Class A ("TAP.A") Common Stock; plus cash in lieu of
0.84326 share of Travelers Property Casualty Corp. Class B will be a
lot more than what I said since TAP.A is at is at $14.40 and B is at
14.44. Sorry, but it will be around $16.20 per contract.
Good luck and good trading
Ray Raffurty
----- Original Message -----
From: Ray Raffurty
To: John Cappello ; realtraders@xxxxxxxxxxxxxxx
Cc: MedianLine@xxxxxxxxxxxxxxx
Sent: Saturday, March 08, 2003 5:40 PM
Subject: [RT] Re: Fedback-This Week's Most Unusual Covered Call
Hi John,
If you purchased 100 shares of C and sold 1CLTCC call your are NOT
completely covered. In August of 2002 Citigroup spun off it's
Travelers
Insurance division http://www.citi.com/citigroup/press/020820a.htm
and
distributed the Traveler shares to owners of Citigroup stock in the
ratio
described at
http://www.cboe.com/common/pageviewer.asp?file=02-
454.doc&dir=ttstocksm&head
=stock%20splits%20%26%20mergers&sec=5
Since options, including the March 15 CCC calls, where trading at
the time
those contracts had to be adjusted to include the shares
distributed and the
option symbols where changed to as the LT thus CLTCC is a
nonconforming
option. At the time of the distribution a new series was created
for
options sold after that date without the LT symbol to indicate 100
shares of
Citigroup only. In other words if you owned 100 shares of C in
early August
2002 and sold (1) 15 CCC call you would be required to deliver both
the 100
Citigroup shares PLUS the shares of Travelers you received, if
exercised,
and the symbol was changer to CLTCC. After the distribution date
if you
purchased 100 shares of C and sold 1 CCC 15 call you would be
covered. As
far as I know the unusual option symbol is always the nonconforming
one.
If you look at the attached chart you will see that in every case
the option
with the LT designation is trading at a higher bid and ask for the
same
strike than the option without the LT. This occurs because the
value of the
options are determined by adding the value of the various Travelers
shares
to the 100 Citigroup shares.
I don't what Smith Barney told you but CLTCC is a 15 strike, it's
just for
more than 100 shares (nonconforming). If you go to the
OptionXpress web
site and go to the calls only option chain you can check a box to
show the
nonconforming options. If the box is checked the LT series shows
and if it
is not checked they don't show.
I believe the quote you got over the week end on CCC was
erroneous. There
may not even be a market in that option currently (in is no longer
showing
up). It is possible that the data from which the various option
chains are
created had defaulted to an old quote when it found no new prices.
Also,
when you use a website to search for option yielding a high % on
covered
calls you must be very careful. They often do not screen out
nonconforming
options but calculate the % gain based on 100
shares!!!!!!!!!!!!!!!!!!! I
have been burned this way and learned to check the CBOE's web site
when
something looks to good.
If you entered an order to sell CCC, I would question why your
broker
substituted the nonconforming CLTCC and demand it be undone. He
should have
rejected the order or given you the price on CCC. If, however, you
entered
the order to sell CLTCC you need to either close the trade before
expiration
or plan to purchase the various Traveler's shares required to be
covered
(more commissions). In this case, perhaps your kindly old broker
will undo
the trade..., NOT. You can always do nothing, but you will be short
Travelers on 2/24/03 after the options are exercised. You can then
buy to
close the short, but the market has a way of moving to make this
the worst
possible outcome, not to mention additional commissions.
The short will be: 4 shares of Travelers Property Casualty Corp.
Class A
("TAP.A") Common Stock; plus 8 shares of Travelers Property
Casualty Corp.
Class B ("TAP.B") Common Stock; plus cash in lieu of 0.30422 share
of
Travelers Property Casualty Corp. Class A ("TAP.A") Common Stock;
plus cash
in lieu of 0.84326 share of Travelers Property Casualty Corp. Class
B
("TAP.B") Common Stock.
Also notice that there are 2 "cash in lieu of" components. This
means you
will need to pay out that cash to the option holder ($1.15 per
contract).
This cash is probably to adjust for fractional shares that where
distributed, but which could not be accounted for otherwise.
I think the odds are against you on this and you will be lucky if
you only
take a small loss. Unfortunately the market does not hand out
money this
way. Occasional there will be small discrepancies in option price
to stock
price, pennies or less. Then professionals will move quickly on
volume and
low commissions to close the discrepancy.
Good luck and good trading,
Ray Raffurty
----- Original Message -----
From: "John Cappello" <jvc689@xxxxxxx>
To: "Ray Raffurty" <r.raffurty@xxxxxxxx>;
<realtraders@xxxxxxxxxxxxxxx>
Cc: <MedianLine@xxxxxxxxxxxxxxx>
Sent: Monday, March 10, 2003 2:07 PM
Subject: Fedback-This Week's Most Unusual Covered Call
> Dear Ray,
>
> I just did a double check with Smith Barney and the correct symbol
> for the $15 strike price is CLTCC.... which is what I sold.
Options
> Express also confirms this. The other designations just further
> describe the Travelers acquisition from last year...and have
nothing
> to do with pricing other than history.
>
> When I first looked at this trade, the $17.50 strike price was in
the
> profit mode to sell the call and buy the stock...that is now
close to
> parity.
>
> Hope this helps.
>
> Sincerely,
>
> John
>
>
>
>
> ------------------ Reply Separator --------------------
> Originally From: "Ray Raffurty" <r.raffurty@xxxxxxxx>
> Subject: Re: [RT] This Week's Most Unusual Covered Call
> Date: 03/08/2003 06:54am
>
>
> [Attachment]
>
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