Formerly About Applied Materials Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Applied Materials

AMAT 256.40

+1.1%

Dec 19 3:59 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Math Junkie who wrote (48658)	7/3/2001 5:12:53 PM
From: Jerome	Read Replies (1) of 70976

*Option Strategy for Richard Palm** and other doubting Thomasses Because so many posters have this fear of a call out of their AMAT shares I have come up with the the following plan. For explanatory purposes lets assume that 900 shares of AMAT are available for covered call writing and that these may represent all or a part of your AMAT portfolio. With AMAT at $50.00 per share I would do the following. 1) sell an OCT. 65 covered call for at least $2.00 on 300 shares (these are 15 points out of the money)This could have been done today. 2)When options expire in July then I would sell a covered call 15 points out of the money for the month of Nov.on another 300 shares. 3) When options expire in August I would write a covered call on another 300 shares , again 15 points out of the money for Dec. I can't give you the exact strikes for these future months because I don't know where AMAT will be at that point in time. By using 900 shares the investor would gain an income of $600.00 per month regardless of where AMAT traded. This is not to say that AMAT would not rise more than 17 dollars in a month, but given the current environment its unlikely. The beauty of this formula is that as AMAT peaks out at whatever price you will not have to be concerned about the exact top. If AMAT peaks at 100 you will be selling calls at the 115 strike.. When AMAT is at 90 you will be selling calls at the 105 strike. As AMAT starts to slide down from the peak there will be less premium in future months but enough to make the whole thing work. The two biggest skeptics of my theories and practices have been Michael and Brian. Perhaps they might comment on what is lacking in this program. This is about as conservative of an option play that I can think of. Regards, Jerome

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next