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Strategies & Market Trends : Value Investing
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To: Joan Osland Graffius who wrote (14203)3/31/2002 3:35:44 PM
From: LauA  Read Replies (2) of 78702
 
Joan,

Thank you for directing us to that presentation.

I haven't any idea where MRK might 'base', but I will confess that I've sold puts at 50 so I won't be unhappy if it dips into the 40's. I've threatened to sell covered calls, but I've never been able to calculate the return. It would make me very sad if Mr. Market suddenly took a liking to MRK and I lost my position.

Perhaps you could share your rationale and calculations on writing covered calls.

I typically write them when I hate the underlying company. And just as frequently I pocket the call premium and continue to hold a company that I don't like. (I got into this situation via an inheritance situation. A stock I just can't get rid of is DOW. I must have a 20-30% gain on it during the past year, but I still own it?!#%! I have a tax question: If you have a stock put to you, you can clearly use the put premium to lower your basis cost. Can you similarly apply the call premium against the cost basis of a stock if it is NOT called away. I assume not, but I had a broker whisper to me that put and call income is not reported to the IRS. The way it was said, I assumed that options players sometimes didn't report. I'd love to find that it can be construed as a return of capital. Is that remotely possible?)

Lau
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