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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 210.76-4.8%11:04 AM EST
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To: andreas_wonisch who wrote (73049)3/4/2002 2:05:26 PM
From: Joe NYCRead Replies (1) of 275872
 
Andreas,

That's the problem when writing CC: You give up potential upside wins for downward protection. If there was a failsafe strategy to get downward protection without sacrificing potential upside everyone would be using it. I only write CC when I am willing to sell the stock at that price (e.g. after a stock surge when I am inclined to sell) or I only write for a portion of my holding CC.

I sell CCs often, but I have changed my opinion about CCs so many times that I can't say I have a strategy any more. As far as selling CCs when you perceive that we have reached the top, lately, I have just sold AMD shares outright, with decent success.

Right now, I don't have any CCs against my AMD shares. I have done a lot of call writing on MU lately.

BTW, Elmer's strategy has many flaws IMO: In AMD's case the stock could go down a lot more ($8-10 seems to be the bottom of AMD's trading range) and he would lose up to 40% of his initial investment. And of course the stock could surge to $20 and Elmer would have to settle with only a tiny profit in the 5% range. Also the choice to buy stock and sell March 15 Calls after the stock had already surged $2 from the recent low was bad timing IMO. And for only 0.45/contract he had to sell a lot of CCs for commissions not to eat too much into his gains.

I have to say I don't see anything wrong with Elmer's strategy / trade. I can see myself doing it exactly what he did. Right now, I am going to stay away from writing any CCs on AMD until the Jerry's presentation. At that point, I will see.

Joe
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