How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Jpres who wrote (6470)	1/17/1998 10:31:00 AM
From: Herm	of 14162

John, American Style options in this country can be called out at any time! Although, the risk is very low there is ALWAYS the chance of being called out IF certain factors surface. Greg outlined them a few post back. Now, to address your question about being called out at $24 on a Jan. 25 strike price I would say NO. UNLESS, perhaps there is a dividend record date coming up BEFORE the option expiration date and someone wants to lock in that dividend. So, they exercise to grab away from you that payout since they will be the new owner of record. Some large foreign investors do that as a strategy. It's called "dividend stripping" and they go from one company to another like PAC MAN. If you have been following our forum, you will recall that it is critical that your net cost basis (nut) ALWAYS be below the CC strike price to avoid short term losses. There is more risk when that happens. A summary of the major concepts can be found on reply post #2638. Enter that number on the upper right hand corner of the message box to view the rules.

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