"Even if you had no faith in SNDK, you could buy common and sell calls at 7, collecting 11% for 3 weeks' worth of holding, while lowering your downside breakeven point to 58."
Ummmmm, of course, this presumes the stock will close at 65 or above when the option expires. If I had no faith, why would I go long and sell a covered call. You might get burned if you go long the stock and your intention was to sell out at 65, and the stock drops below 65 at time of expiration. If you intend to stay long, then your cost average, presuming the option does not get exercised is $58. If the stocks drops below 58, then you are still losing money, and remain a long for the duration.
Going long, means going long, whether you are selling covered calls or not. |
