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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: stockman_scott who wrote (3526)	3/17/2002 4:11:14 PM
From: Dan Duchardt	Read Replies (2) of 5205

Scott, Rather an unbalanced view presented in that article, IMHO. The elaboration of the "Pros" is defended by an observation Over a year's period of time, a typical stock investor might get lucky and get a 20% rise in the value of his stock. On the other hand, the stock may fall in price, or may be right where it started a year ago. But nothing much is said in the "Cons" section about the risk of a stock running away, except Simply buy back the option that you wrote, which closes your position and liability to sell the stock, and you'll continue to participate in further stock price gains. as if you could do that without taking a loss on the calls and somehow being assured that your future participation in the stock would be to realize further gains. The reality is that during that "lucky" 20% annual gain, stocks frequently whip that far, or twice that far or more up and then down several times in a year. Like our friend QCOM that just ranged over 12 points in 10 trading days, a 30% move. Not to say CCs are not a reasonable approach that over the long haul can be rewarding, but it's not nearly so simple as that article makes it sound. Dan

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