The Wheeling daily intelligencer. [volume] (Wheeling, W. Va.) 1865-1903, 1886-10-23
MAnE cIEAR AZ pAY.
The Puts, Calls, Spreads, n straddlss Of
Change Described.

II
MADE CLEAR AS DAY,
The Puts, Calls, Spreads, and Straddlss OF
Change Described.
"WhsL are puts 'calls,' spreads and
ssked o New York Nail and
reporter.
"Well,p said John Z. MCCsnn, the con-
adeutal clerk OF Russell Sage, Of whom
tho question wss asked, I'm tell you II
you will promise never TO mention the
p%oetical subject sgain, II requires pretty
delft wording to make the thing clear, 90
is not an exhiliArSting subject 10 talk
on, You hear q good deal about puts
and calls but / venture to say that there
IRE 5O,OO0,000 people IN the United statea
who DO not know what they arc, nor
what tho meaning is OF the word
'priyilpges.' Now, q privilege isS cor,
tract by which tho maker Of It, Russell
Sage, s. v. White, Jay Gould, or Harvey
Kennedy, engages to purchase from the
holder in tue n case, or 10 sell 70 the
holder in the other case, q number Of
shares Of some specified stock Ut q certain
price, at any time within y certain period,
1T the option Of the holder, Got Instr
"a cali Ia y privilege bought Of the
mAkeT, ut O certain price, aud the owner
OF 1t is privileged to call Tor y certain
amount Of stock at a given price, within
thirty, sixty or ninety days, four or Blk
months, II q ina holds y put he has
the right to deliver TO the maker Of the
privilege q stock at 9 certain agreed price
| within a certain number OF days. Clear
MOI Well, let's try OuCe more.
Suppose Western Union Is selling 81
70. AmAn wants q sixty,day put on II
al 6G, because he believes the stock Ia
going down. He gives Mr.. Sage, MIR,
White, Mr.. Kennedy, or Mr.. Gould per
cent. on the amount Of stock he wants TO
deal in, A hundred ahaIes is usual, and
/ per cent. ia 500. He receives in return
a slip Of paper signed by either or the
other Of these gentlemen. Then II WesE'
ern Union goes below G6 within sixty days
he may bay it for whatever 1t 10 selling
for below that price, and put 1t to !hs
maker Of the privilege ct the price agreed
~on-B6-and receive q check Tor S6,OOO
THE holder makes the difference, All,
YOU understand II Telegraph does no
10 below &c the holder IL out his 500
The CALI buslnegs operates exactly in tht
opposite way. A man buys the privilege
OF calling Western Union at rs when II Ia
selling at 10, II it sells above rs you can
call on the maker OF the privilege Tor q
hundred shares at 70, and the hundred
shares are thug bought by the holder lot
$3.50, aud he turGs around and sells 1t aI
so il the stock 10 selling there, and pocksh
the difference" ,o,
"What about 'spraads' and 'slraddles'?'
"a 'straddlo' is u put aud cali com.
bined. Tho holder Of one may put
stock to the maker. Of the privilege OF
call for it. 'aErRddles' come high, be-
cause there is money in them whichever
way the market may 50. II the market
does not 20 at all, but stAada still, why
the maker Is in the money he has been
nRld for the privilege, usually about y
per cent, or $500. A spread Ia also q
put and u 'caIl' combined, but there 10
this difference: o 'slraddle' is made at the
market, That Is to say, the maker Of the
privilege taxes the risk that the stock In
.IuueStion does not move 10 any extent
from the price at which It is selling when
the privilege is sold. In 4 spread tho
maker mas more leeway. II Western
Union il selling at 70, to so hack to the
old illustration, tho maker OF the priv.
lege sells u spread cay ut " and 50, II
1t goes below " the holder can put the
stock and mako the difference, and il 1t
goes above 50 the holder can cali at that
price aud reap the profits. But so long IS
the price Of Che atoCk keeps within those
points the maker oil the privilege
Is sale. 10 put 1t In another way, the
holder OF o 'straddle' will make II
the market for the stock he Is
dealing In moves ut all. The
holder OF u spread doesn't make any.
thing until the market moves past certain
limits. There Is one thing more; the
maker OF a privilege only receives the
money for which he sells the privilege,
whils the holder may make ~thousandS-ol
nothing.
"Hhe mention Of 'puta' and 'Cslls' re:
calls perlorCO the exciting times two years
Ggo laDt spring, when the market went
down with a rush and the holders oil puts
issued by MIR, Sage invested his office
Ike an army. Alter the above explanR.
ton II will lie aeen that their privilege Of
putticg stock TO Mr.. Sage was extremely
valuable. Their privileges were so many
contracts whereby Mr.. Sage agreed to
take these stocks at q price considerably
above the market price. During Eve day.
Mr.. Sage paid out what few men in New
York were probably ablo TO pay out
about $4,0OO,000 in solid cash. He kept
on deposit then, and lie does now, $4,000.
GOO in available money at the Importers
& Traders Bank. Since that excitement
the probability Ia that Mr.. Sage has drawn
out Of this very business on 'puto' and
calls more money than he then paid
out. A great deal OF the stock certificates
which were then put to him he held ard
realized when the market advanced"