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Strategies & Market Trends : AIM Questions and Answers

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To: labestul who wrote (174)	7/16/2001 1:05:13 PM
From: OldAIMGuy	Read Replies (1) of 221

Hi Barry, Yes, I think you have the basis for my argument. Yes, if you were to carry the options strategy to the next level of buy-backs and extension to the next option level, one could make it more practical at lower levels of cash reserve. It's just my Scottish ancestors that haunt me and don't like me to spend any money and are always happy when I collect it! :-) At the worst, the option exercise might end up being a wash or a nominal loss in your example. There's no reason not to attempt it. It's been my own experience that CALL option premiums expand the longer the bull market runs. Late in a Bull phase they tend to be pretty generous. So, since this corresponds with when AIM is flush with cash, it always seemed a natural thing to do. Of the $150 one might collect on a "contract" of selling a Call, my guess is that the commission will be between $30 and $50 for the transaction and then there's a short term income tax payment to be made. So, to net about $80 from a $150 contract is just about right. Obviously if you held a very large position in a stock and were selling 5 contracts, the commission would be quite a bit less per contract. Best regards, Tom

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