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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: RFH who wrote (8225)8/16/1999 11:22:00 AM
From: JZGalt   of 18928
 
Robert,

IMO, I would skip the covered call strategy. I think you would just end up screwing up the AUTOMATIC part of AIM. By handcuffing yourself to the committment of the shares by selling the call, you leave yourself wide open to the stock running up or down and messing up a perfectly good plan to AIM the stock.

The other caveat is that even with 100 share trades, the commissions are going to eat you alive on the stocks you own under $50. Trading near a strike price and near the expiration date to avoid the handcuffing as described above, would yield low returns after commissions.

The only way I would use options with AIM is to sell covered calls and sell a corresponding number of puts at the prices AIM would have you make the purchases at anyway. Obviously you might have a different risk tolerance.

For instance in your JBL account if your next sale was to be at $45 and your next buy was to be at $35, then consider selling some $45 calls and also selling some $35 puts on options that are far from expiration.

Be very careful using any option. A friend of mine likened buying stocks to whittling with a sharp pocket knife, but buying options like using a chainsaw. In the first case you might cut your hand. In the second case you might lose your arm.

----
Dave
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