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Strategies & Market Trends : Options
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To: taxman who wrote (165)12/27/1999 10:42:00 PM
From: Grant Lu  Read Replies (1) of 8096
 
Doesn't selling deep in the money covered calls protect your gains quite well? Of course, you no longer participate in any more upside gain, but you have locked in your gain until the one year holding period kicks in. (unless there is a really bad meltdown)

For example, say a stock is at 100; you sell a covered call with strike price of 60 at a premium of 42. If stock goes to 150, you gain 50 on the stock and lose 48 on the call. If the stock goes to 60, you lose 40 on the stock but gain 42 on the call. With commissions and spread on buy/sell, you come out even.
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