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E MOTLEY FOOL =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=
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                        INVESTING  BASICS       =20
                    Tuesday, November 20, 2001
benjamin.rogers@enron.com
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IN THIS ISSUE
---------------------
- Q&A: Is Insider Selling Significant?

- Q&A: What Does "Insured by FDIC" Mean?

- LESSON: Options 101
=09
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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

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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


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=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

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ogers@enron.com

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MsgId: msg-9745-2001-11-20_16-50-04-6060412_5_Plain_MessageAddress.msg-16:5=
1:11(11-20-2001)
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Message-Recipient: benjamin.rogers@enron.com