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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: PAL who wrote (1842)	8/10/2001 6:08:58 PM
From: BDR	Read Replies (2) of 5205

<<Remember when someone suggested to buy/write elon when it was in the 80's. Even then the suggestion was that you leverage by using margin and write calls on the double number of shares. If someone took that advice and did not cover soon enough, the amount of beatings was severe.>> If you don't have a link to the post that you have referred to several times now, do you recall which thread it was on and about when the recommendation was made? The reason I am asking is because you have referenced this advice several times as an example of the risks of covered call writing. Certainly buying a stock then tripling the amount held using margin and writing calls against the position is a risky proposition. But if the person lost money when the stock fell it was because of 1) use of margin and 2) immobilization by fear or panic as the stock fell (not alone there). The fatal flaw in the strategy was over commitment to a single stock using margin, not the covered call aspect. I am trying to understand what relevance the example has to what has been discussed here over the last several months. You have thrown the example in the face of several people who have stated a preference for covered call writing. I don't recall anyone here advocating using margin. And we agreed a long time ago that covered calls offered poor protection against a massive decline in stock price. There are other better strategies for that, if only we could be perspicacious enough to put them to use at an appropriate time. Most of us are trying to generate some income from our current (much diminished) portfolios. Of course, if you had read through the thread before forming your opinions about the participants, you would know all that.

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