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Hi John,
The original chart from OptionsXpress that I
posted on Sunday did show the March 15 CCC call, however I believe it was the
result of bad data. If you look at that chart, copied here, you will see
that the percentages for CCC are way out of line with what you would
expect. This was the first clue that something was wrong.
Good luck and good trading,
Ray Raffurty
<BLOCKQUOTE
>
----- Original Message -----
<DIV
>From:
John Cappello
To: <A title=realtraders@xxxxxxxxxxxxxxx
href="">realtraders@xxxxxxxxxxxxxxx
Sent: Tuesday, March 11, 2003 12:59
PM
Subject: [RT] Fedback-This Week's Most
Unusual Covered Call
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" <<A
href="">r.raffurty@xxxxxxxx>Subject: Re:
[RT] Re: Fedback-This Week's Most Unusual Covered CallDate: 03/08/2003
05:59pmCorrection: 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 tradingRay
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 <A
href="">http://www.citi.com/citigroup/press/020820a.htm
and distributed the Traveler shares to owners of Citigroup stock
in the ratio described at <A
href="">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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