CONEJO VALLEY'S SEMTECH TO START SELLING STOCK OPTIONS.

Byline: Deborah Adamson Daily News Staff Writer

Stock options for Semtech Corp. will begin trading Wednesday on the Chicago Board Options Exchange and the American Stock Exchange.

Initial strike prices will be 17-1/2, 20 and 22-1/2 for the Newbury Park-based maker of silicone rectifiers, integrated circuits and related devices.

Initial expiration months will be February, March, June and September 1998.

An option is a right to buy or sell a stock - usually in lots of 100 shares - at a set price, called the strike price. Expiration dates for options range from one month to several years, depending on the stock it is covering and whether it's one security or a basket of stocks.

Call options are rights to buy a stock within a certain time. A put is a right to sell. These calls and puts are cheaper than the stocks themselves, making them good hedges against potentially large losses.

For example, an investor purchases 100 shares of XYZ Corp. for $35 a share at a cost of $3,500. After the stock gains $5 a share she wants to protect her gain in case it declines. She buys a June put to sell ABC stock for $40. The price of the option is 4, or $400 for 100 shares.

If the stock drops before June, she can exercise her option to sell at $40 and protect her gain. She will have made $500 (100 shares sold at a $5 per share gain), minus the cost of the options purchase and any transaction fees.

Conversely, if she expects the stock price to rise, she could buy a June XYZ 40 call instead to give her the right to buy the stock at $40. If the stock increases above $40 before her options expire, she's making money.

When a company is listed on the options exchange, trading becomes heavier in the underlying stock but the option trades usually doesn't drive the price, a CBOE spokeswoman said.