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Strategies & Market Trends : DAYTRADING/SWINGTRADING STOCKS with INTRADAY INVESTMENTS
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To: Mark Davis who wrote (333)6/26/2001 12:02:56 AM
From: deronw   of 565
 
Mark,

You bring up a very valid point. We sometimes will create a spread by also buying the calls at a higher strike price at the same time we sell the calls. However, we typically only do this with higher risk plays, such as when a company could be acquired. The likelihood of IBM having any such major news is very slim, so our risk is less. Nevertheless, your point is very valid.

Also keep in mind that we do not limit ourselves to only selling calls. If we are bullish on a stock (such as in a bull market), we can utilize the same strategy by selling puts instead of calls. Still gives the same benefit of collecting premium.

Deron
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