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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: bobkansas who wrote (1176)	6/24/2001 10:48:41 AM
From: PoetTrader	Read Replies (1) of 5205

Bridge...thanks for the example...I guess this is a question to the entire thread...my philosophy about paper loss must be very different than everyone else's...In the sample you posted if dell goes to 18 you lose REAL money...in the same sample if you had the underlying stock at 24.00 dollars say and you sold a call for (I'm pulling something out of my hat) let's say .50 -- you have pocketed 1250.00 or so...the stock drops to 18.00 -- your new cost basis is 23.50 and yes you have lost a bunch of money on paper, but you haven't lost actual money. THen you go and write another call the next month and so on and so on...Finally the market perks up and dell has risen from the ashes and is beyond 25 (and your cost basis is now 19.00) and you stop writing calls (or maybe you don't) and you sell it 30.00 one day. All in all you've had many pay days and lost no REAL money. However, you may have lost the ability to play other stocks with all that dead money in your portfolio...I guess that's how I see stocks that have dived that I don't want to sell. But I see how your strategy would be handsome for those who don't want to have money tied up. Best and Good Luck, PoetTrader

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