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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: golfinvestor who wrote (603)5/16/2001 7:15:34 PM
From: Uncle Frank  Read Replies (2) of 5205
 
>> I own QCOM in a taxable account with a very low tax basis. I'm looking to sell the QCOM Jun ? cc. What strike price would you consider reasonably safe (as safe as a cc can be) from being called away?

Since we already had a similar discussion by PM, I'm going to respond so the smart guys can criticize me <again>, and in hopes we might precipitate a group discussion on this thorny issue - the risk of triggering a major tax event.

I think Q has a shot at making a substantial move if the market holds, and the fact that everyone is convinced the nasdaq will falter encourages me to think it might not! Personally I'm going to wait to see if Q has moved into a new trading range due to the recent events before I make a decision.

>> My gut feel is a strike price of 80 should hold through June's expiration, but I would appreciate the opinion of others.

I would think so, too, but AAFFP June 80s closed at .80 bid, .85 ask with the underlying at 64.76, so there's no percentage in writing them unless the stock rises above 70. Once that happens, you could write June 80s for a reasonable premium, but you would have to commit yourself to rolling them out if Q should make a giant move. Maybe that's the answer to the tax trigger problem in a nutshell.

Wouldn't that be a sweet problem :-).

uf
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