How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Jonathan Thomas who wrote (13068)	7/20/2000 8:37:19 AM
From: Bridge Player	Read Replies (1) of 14162

<<You had to shell out 12 1/16 to buy the stock. Money spent. Then, between the calls and the puts, you RECEIVE 4 5/16 in option premium, your cost of ownership is now 7.75, does that make sense?>> Yes, it does. That much is correct. << So, anything above 7.75, you can buy back the PUT at expiry, and the rest is profit>> Yes, you CAN buy back the short 12 1/2 puts (at a loss). You sold the puts for 2 1/16. They are now worth (at 7 3/4 price of the stock) 4 3/4. Your loss on the puts is 2 11/16. <<You were simply missing that with puts and calls, ONE side is always guaranteed to expire worthless in your favor>> And you were overlooking the fact that although your calls expired, your puts are now in the money and you have a loss on them. BP.

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