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Enron Mail |
=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D TH= E MOTLEY FOOL =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D INVESTING BASICS =20 Tuesday, November 20, 2001 benjamin.rogers@enron.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D IN THIS ISSUE --------------------- - Q&A: Is Insider Selling Significant? - Q&A: What Does "Insured by FDIC" Mean? - LESSON: Options 101 =09 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SPONSORED BY: Ameritrade Ameritrade brings you the market's most valuable commodity: Knowledge. Get a free 6-month Morningstar.com=AE Premium Membership when you open an account. http://www.ameritrade.com/o.cgi?a=3Dxbx&;o=3Drkg&p=3D/html/mstar.fhtml =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D YOUR QUESTIONS ANSWERED=20 Q. Should an investor be concerned if one or more officers of a=20 company sell shares of its stock that they own?=20 A. Although it may look like a red flag, it isn't necessarily=20 one. Many executives today receive a large part of their=20 compensation in stock options. So when they have to buy a house=20 or make a college tuition payment, they sell some shares. They=20 may also be trying to diversify their investments, not wanting=20 to have too much of their portfolio in one company.=20 On the other hand, one insider (or many insiders) selling might=20 indeed signal a loss of faith in the company. If you're worried,=20 you might want to take a closer look at the company's recent=20 performance. Perhaps fire up your computer and see what people=20 interested in the company are saying about it online, on message=20 boards.=20 Q. What does "insured by FDIC" mean, and what does it NOT=20 insure?=20 A. The Federal Deposit Insurance Corp. (FDIC) insures our=20 traditional checking, savings and money market accounts (as well=20 as CDs) held at banks and thrifts for up to $100,000. Note,=20 though, that the FDIC does not cover stocks, bonds, mutual=20 funds, life insurance policies, annuities and the like. For=20 these, check with your financial service company to see what=20 kind of insurance may be provided.=20 Learn more about the FDIC at their website. To make sure you are=20 stashing your short-term cash in the most profitable place,=20 check out our Savings Center.=20 http://www.fdic.gov/ http://www.fool.com/savings/savings.htm ----------------------------------------------------------------- THIS WEEK'S LESSON=20 OPTIONS 101 Imagine you want to invest in Legume Gas Works (ticker: BEANZ).=20 You can buy shares the usual way -- or you can buy options.=20 Here's an introduction to options.=20 There are two main types: calls and puts. A call gives you the=20 right to buy a set amount of shares at a set price within a=20 certain period of time (often just a few months). For this=20 right, you pay a price premium. Puts are similar, but give you=20 the right to sell shares.=20 If Legume is selling for $50 per share and you expect it to=20 rise, you could buy "October $55" call options for it. Let's say=20 you snap up calls to buy 100 shares, for $6 each, or a total of=20 $600. If just before your options expire Legume is selling for=20 $65 per share, you can exercise your options and buy 100 shares=20 for $5,500. Then you can keep them or sell them for $6,500.=20 If you sell, you make a $1,000 profit, right? Nope. You paid=20 $600, remember? So your profit is down to $400 -- less, when you=20 account for trading commissions.=20 Options are risky. If Legume stays at $55 or falls, your $600=20 would be entirely lost. It has to top $61 per share -- $55 plus=20 $6 -- by October for you to profit.=20 Some folks like options because of the leverage they offer. They=20 point out that if you only have $1,000, you can only buy 20=20 shares of a $50 stock. Alternatively, that $1,000 could buy many=20 more options tied to hundreds of shares of stock. True enough.=20 With options, though, timing is critical. If things don't go=20 your way in a short-term time frame, your option will expire=20 worthless.=20 Most options expire unexercised and worthless. (Those most=20 likely to profit from options are the ones who "write" or sell=20 the options.) That's because options are really about buying=20 time, not stocks. If you're sure that Legume's stock will rise,=20 you're probably best off buying its stock. Then if it doesn't=20 behave as you expected it to, you can either sell the shares or=20 hang on patiently.=20 Options are not for beginning investors, and even more advanced=20 investors might consider steering clear.=20 You can read more about options at this Motley Fool FAQ. http://www.fool.com/FoolFAQ/foolfaq0055.htm =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SPONSORED BY: Ameritrade Ameritrade brings you the market's most valuable commodity: Knowledge. Get a free 6-month Morningstar.com=AE Premium Membership when you open an account. http://www.ameritrade.com/o.cgi?a=3Dxbx&;o=3Drkg&p=3D/html/mstar.fhtml =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D My Portfolio: http://quote.fool.com/portfolios My Discussion Boards: http://boards.fool.com/favoriteboards.asp WANNA TAKE THE SHORTCUT? Check out our new Crash Courses, the fastest way to get your finances in order. Get results in less than an hour, for just $10. Try one today! http://www.fool.com/seminars/ccportal.htm?ref=3Dem_ibtxt PERKS FOR FOOLS ONLY Get free stuff and special offers, just for you! http://www.fool.com/community/mbc/mbc.asp?source=3Demibtxt =20 CUSTOMER SERVICE Ask our staff for help with email delivery problems. http://boards.fool.com/messages.asp?id=3D1010026000000000 =20 UNSUBSCRIBE Here's how to unsubscribe or change your settings. http://www.fool.com/community/freemail/freemaillogin.asp?email=3Dbenjamin.r= ogers@enron.com _________________________________________________________________ Copyright © 1995-2001 The Motley Fool. All rights reserved. Legal Information: http://www.fool.com/help/FoolMarks.htm MsgId: msg-9745-2001-11-20_16-50-04-6060412_5_Plain_MessageAddress.msg-16:5= 1:11(11-20-2001) X-Version: mailer-sender-master,v 1.84=20 X-Version: mailer-sender-daemon,v 1.84=20 Message-Recipient: benjamin.rogers@enron.com
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