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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)
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To: Mark Z who wrote (1501)7/8/1999 3:33:00 PM
From: Madpinto  Read Replies (1) of 2241
 
Your point is well taken. This is why I said it was a possibility and not a recommendation. Certainly commissions and carrying costs play a part in the decision. However, you have missed an important part of my idea. If you sell the stock short, you effectively get a "free" put at your strike. Instead of exercising the call right away, you can wait until expiration. In your case, ELNK could come out with news that kills the stock. Your calls may lose everything (31), but the stock could lose even more (up to 66 3/8). Granted this is unlikely, but no one thought these stocks could go up as fast as they did either. This strategy obviously only works if you can wait to get your cash. I would not use this strategy in stocks that pay a dividend before expiration or in takeover stocks (stocks have a deal pending). In some of these high flying internet stocks, though, the possibility of a huge down move could really make this strategy pay off .
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