How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Herm who wrote (13784)	7/19/2001 4:31:59 AM
From: Newton Yuen	Read Replies (4) of 14162

Herm: Update on AT&T and AWE. I called "Options" and as you guessed, the AWE shares do go with the AT&T shares (at no additional cost) if my call is exercised. In this instance, the call buyer has a sweet deal. His July 20 call is now worth $26.00 and he only needs to pay me $20.00. Of the $26.00, roughly $20.00 is for the AT&T stocks and $6.00 is for the fractional AWE stocks. The call buyer in this case reaps all the benefits of a company diversification and issuance of new stocks in a newly formed subsidiary at no additional cost to him. Unless I buy back my call, I do not enjoy the benefits of the additional AWE stocks issued to AT&T stockholders. I am tempted to cover my call, buy additional AWE shares to the closed hundred and then sell both AT&T and AWE calls in the out months. So I guess we need to look for stocks like AT&T and reap a really easy profit by buying a call just before the issuance of new stock shares. Aloha, Newton

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