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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Uncle Frank who wrote (626)5/17/2001 9:38:55 PM
From: BDR  Read Replies (2) of 5205
 
Thinking out loud about QCOM options as expiration approaches using today's closing prices:

I am short the May 65s as covered calls and I need to decide what to do about them as I may be looking at being called out of them. I can:

1) Let them get exercised, effective sales price = 65 + 2.25 for the
option premium received 16 days ago, resulting in tax consequences in taxable
accounts. Best choice if price were to fall in the near future. I could always
buy the shares back at a lower price. One stock sale commission

2) Buy the calls back. Ask at the close today is 1.75, net of +.50 per
share, a short term gain. Best if QCOM is going to go on an extended
run. One option purchase commission.

3) Roll out to June 65s. Buy the Mays back and immediately sell the
Junes. Net = 5.30 - 1.75 = 3.55 more cash in the account. Best if QCOM
is going to wander around 65+/- for the next month. Two option commissions.

4) Roll up and out to say the June 75s. Net = 1.50 - 1.75 = -25 loss
per share but now have raised the strike price 10 bucks. Best if QCOM is
going to steadily rise over the next month. Two option commissions.

Without the benefit of a crystal ball I will probably do a variant of
#4, rolling from the May 65s to the June 70s for an net credit and an
increase in the strike price. I have to do this tomorrow AM as I will
not be near a computer for the rest of the day. Any thoughts?
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