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: micny who wrote (8425)	8/31/1998 5:45:00 PM
From: VincentTH	Read Replies (1) of 14162

Caroline said you can do that, and Doug added that it's dangerous. I just want to add a technical point: After you sell an ITM call, the margin value of your stock is reduced by the amount that is ITM. Say you own 1000 shares of XYZ @11 a piece, your margin value is 11,000. Now, say you sell 10 calls with a strike price of $10. Your equity margin value is now reduced to 10,000 since you cannot count the amount that is in the money ($1,000). Of course, the premium paid to you also count towards the margin value (i.e. reduce your margin debit). My 2 cents.

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