SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Non-Tech : Any info about Iomega (IOM)?
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Guy Gordon who wrote (7562)9/25/1996 2:47:00 PM
From: chester lee   of 58324
 
Covered call writing is an excellent way to reduce risk and bring in income. For example:

I have 1000 shares of IOMG and I sell calls to open for Feb 35's for 2-11/16 (actual bid). The IOMG stock now is priced at 23-7/8 (actual price).

I'm not expecting the stock price to drop (otherwise I would sell my shares or buy puts). I'm expecting the stock to rise (or at least stay steady).

Here are my scenarios:
1. IOMG goes up and closes ABOVE (not at) 35 on the third friday on Feb 97'. I make 11-1/8 on the stock and keep 2-11/16 for a total of 13-13/16 before commissions. A 57.85% return in 5 months (or 139% annual). I'm not going to cry if IOMG closes at 90 and I left money on the table. There are mo sure things in life. And If I'm married to IOMG than I can always buy the options back to close the position. That means, IOMG can on feb option expiration day close at 37-11/16, where I can buy the options back at about 2-11/16 and get to keep my IO shares.

2. IOMG goes up and closes BELOW 35 on Feb option expiration day. I still own the stock as if I would if I didn't write options but I get to Keep all the options money of 2-11/16 (or $2,687.50) a return of 11.3% in 5 months or 27% annual return. Where am I making a mistake. Remember life is perfect and I know of no one who makes perfect trades each time.

3. IOMG goes down. Yes I get to keep all the options money of 2-11/16 (or $2,687.50). But clearly I've made a mistake. I thought IOMG was going up and it went down. I know this NEVER happens top any of you guy. But, I'm somewhat protected. IOMG can drop to 21-3/8 adn I still would not have lost any money (compared to IF I had sold IOMG at 23-7/8 w/o writing the calls).

4. NOTE: Writing the IOMG options obligates me to hold the stock until FEB (unless I also close the options positions). But Isn't that why I bouhgt IOMG in the first place (to hold the stock as it rises). Clearly this technique of call writing is for everybody. The more risky personalities may even write options NAKED. I find that hard to do in my office where the girls are squirmish.

I hope this highlight why Writing options reduces risk.

Chester
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News