Taking The LEAP Into Stock Options

Reserving the right to purchase stock later offers both risk and reward. Here's how to carefully get a handle on it all.

twice that of the market. That’s not to say the company isn’t a solid-sender, one that keeps Wall Street happy with profit increases year after year. Still, a frugal investor might feel that the company stock has gotten a bit ahead of itself.

To catch a ride on Pfizer and not risk a hefty outlay, consider the company’s LEAP. A contract set to expire in January 2000 with a strike price of $110, just $10 above the stock’s current level, cost $20.50 per contract or $2,050 as of press time.

While this article focuses primarily On LEAPs and calls, there is a myriad of ways to play the options market Consider puts, which as we said above area contract to sell a certain number of shares at a specific price on a fixed future date. If for some reason you were particularly nervous about a stock or even a LEAP investment, you might buy a put for 100 shares as a way to guarantee a set future price. Combine a call and a put this way, and you have what industry experts call a straddle–a way to fence your investment from risk.

Of course, there’s much more to know about LEAPs and options. To get your hands on more information, we suggest contacting the following: .
Options Industry Council 440 S. LaSalle St., Suite 2400 Chicago, IL 60605 800-952-8665 www.optionscentral.com
An organization representing the options market, the Council offers phlets and a CD-ROM instruction to investors

American Stock Exchange inc. 86 Trinity Pl. New York, NY 10006 800-THE-AMEX (www.amex.com) Chicago Board Options Exchange (www.cboe.com)

The two largest exchanges where options are traded, both offer Web sites full of information on options trading and strategies. T
hey also offer a free pamphlet, Characteristics and Risks of Standardized Options, that outlines the scope and terms of options trading. To order, contact the AMEX.

Finally, you might check with your broker. Charles Schwab (800-435-4000), for instance, offers publications to investors explaining the ins and outs Of LEAPs and other options.

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