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Technology Stocks : Compaq
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To: Night Writer who wrote (72853)12/1/1999 12:38:00 PM
From: rudedog  Read Replies (1) of 97611
 
NW -
You're right on selling calls - although I would not really classify it as a short play. The seller expects that the stock price will stay below the strike price. I have not sold calls that are very far out - I usually look for a good short term premium on an issue where investors have a lot of confidence but I don't - DELL being the premier example. The buy interest drives the premium up.

I assume these are covered calls - and that is the reason that the play is not really a short. Since the seller holds the underlying, he expects that the base value will not go down a lot... the loss on the underlying will almost always be greater than the call premium. So this is a play where you have confidence in the stability of the underlying, but think it will stay in a range under the strike price.
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