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Politics : Formerly About Advanced Micro Devices
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To: Dinesh who wrote (107942)4/26/2000 11:59:00 AM
From: kash johal  Read Replies (1) of 1574633
 
Dinesh,

A lot of the models are simplistic as they don't take taxation into account.

Covered calls can help on tax management.

As an example i wrote 170 Jan 2001 calls for around $9.00

If AMD hits $120 next month(as niceguy assures me) these calls may become worth $40++ or so.

If I buy these back I will have a $30 loss or around $500K.

This can be used to offset my gains this year.

I can then write new calls say Apr 2001 and if these get assigned my overall gain will LONG TERM CAPITAL GAINS.

If you think about it one has rolled short term gains into long term gains, reduced taxes dramatically and also reduced risk.

I think the field of options is very complicated and simplistic spreadsheets or black/scholes pricing analysis don't do it justice.

regards,

Kash
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