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Richard, well in the case of buying the options - they are more risky. You can lose all of your money doing this. As far as writing the options, the brokerage knows that you will pocket some money for writing the covered calls. Meanwhile, if your stock goes down - you will be protected some and in any event will still own the stock. The important thing here is that your stock not go down more than what you sold the calls for. But regardless, even if it does go down more, the brokerage knows that you will retain possession of your stock. On the other hand, if your stock goes up, you will make some money less whatever premium the calls that you sold go up. I find that this is where people are getting lost on my previous comments - Here, I'm trying to make the point that if Intel goes up (and does anybody on this bb think it won't) you will lose some of that gain because of your sold calls. And, if the buyer of those calls exercises the option before options expiration day, he will be the one that gets the big gain from the runup as he will call away your stock way back where the strike price was of your sold calls - not the present higher price. It is this aspect that I really have to question. In other words, if you sell the call option for 9 dollars and Intel runs up 25 dollars - all you are going to get out of that 25 point runup is the 9 dollars plus however many dollars you sold above the the difference between the strike price that you sold the calls and the current Intel stock price back when you sold those calls,unless you have seen the light and bought back the calls sooner (hopefully,one did). Again, I'm not one to be in this thing to lose any money, not ANY. However, I've read Jules G's notes after this note and I agree that I'm not one who buys the stock. That anybody that has sold the calls and come out okay in the past,that's fine. But, there are still disadvantages to it and bad things can happen. In conclusion, your brokerage will allow you to do the one thing because they recognize that you won't lose ALL of your money - whether your stock is called away or not; or whether your stock goes up or down. Whereas, just buying calls and puts, you do risk losing all of your money. It's just a difference in philosophy between traders and investors. Traders don't like to give up anything - not even just a tiny, tiny premium or whatever. Of course, at times we do. Richard, I hope that you understand that I was just not answering your note, but trying to address everybody else here also - as that SI still has me on 5 note limit. Going to start getting ready for evening church services. Later. Good trading. Jack |
