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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: FaultLine who started this subject	7/19/2002 8:54:26 PM
From: fmikehugo	Read Replies (3) of 5205

I hold 1K of APPL with a basis of 25 and wrote very comfortably for the first half of the year. AAPL has fallen to 15, and I am trying to assemble a new CC strategy. Aug 15s offer a respectable premium of $1, but early exercise would mean a $10K loss on the underlying. To calculate the risk of early exercise I need to know what the calls cost in the first place, which seems impossible since the calls have been bought in different lots at different prices. Suppose AAPL rises to 15.50. The holder of calls bought at .25 could realize a profit by early exercise, while the holder of calls bought at .75 would not (ignoring commissions). Is my picture basically correct? How does one calculate the risk? TIA Mike Hugo

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