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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Uncle Frank who wrote (1854)8/9/2001 2:13:14 PM
From: PAL   of 5205
 
My concern about the buy-write approach is that it seems to focus on stocks with the highest premiums rather than stocks with the highest prospects.

you are quite right, Frank. When element of greed enters the picture (which is frequent and very easy - been there done that), disaster follows. Human nature makes a person reluctant to admit that he/she makes a mistakes, hence seldom to take a small loss at the expense of a huge one. Of course my old man always says that the worst lie is lying toyourself. One knows it is wrong not to take the loss, but keeps denying. :-(

I know the thread is about covered call. That means using your security as coverage. The objective is to get additional return. This is not about trading options like diagonal spread, bull spread, buttefly etc. All those fancy names are beyond me and probably should be in a different forum. I feel that the return can be enhanced by writing a "covered strangle".

>> have the capacity to take assignment.
That's never an issue for covered call writers.

the assignment is on the put, i.e. when the stock is traded below the strike price and get assigned, one should have the cash to pay for it instead of margin. you remember that margin killed the market and take many people to the poor house.

best to you

paul
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