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.
Technology Stocks : WDC/Sandisk Corporation
WDC 181.18+3.5%Dec 19 3:59 PM EST
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: gdichaz who wrote (6619)8/15/1999 6:13:00 PM
From: Art Bechhoefer  Read Replies (1) of 60323
 
One obvious way of raising cash is simply to sell shares outright. Selling covered calls is, as you point out, a conservative strategy that has the effect of locking in profits but also precluding additional major gains. If an investor sold covered calls in SNDK with a striking price of 90, for example, and the stock exceded that price before the call options expired, then the stock would be called away at a price of 90. The "profit" from selling covered calls only occurs if the amount received from the sale is greater than what could have been received by waiting for the stock to exceed the striking price plus the premium. The premium is the extra that you receive for selling a covered call with an expiration date far in advance of the transaction date. To use the same example, say that a SNDK call with striking price of 90 and expiration in December or January sells for a price of, say, 10. About 7 of those points are premium. If the stock goes above 97 before the option expires, the option writer loses. But if the stock falters and stays below 90, the calls eventually expire worthless and the transaction is relatively profitable. Note that this strategy only works when you sell a call option well in advance of its expiration date, in order to take advantage of the premium.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News