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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: kas1 who wrote (23)	4/19/2001 9:00:10 AM
From: MetalTrader	Read Replies (1) of 5205

That would only make sense if the calls had a negative underlying premium. Assuming the calls were written at any price above zero your loss on the calls in your scenario is compensated with the gain of $20 in the underlying common. You are describing the perfect Buy/Write scenario. Unless you had a premium of less than NEGATIVE $20 you would have a profitable trade. What you may be alluding to is using premium money to buy additional stock at the time of the write. The incremental gain in that stock can be less than the loss in the entire call position. Black Scholes model isn't really needed in this case I think. mt

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