Barrick Gold (ABX) Message Board

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Gold/Mining/Energy : Barrick Gold (ABX)

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To: russet who wrote (2610)	5/11/2002 8:21:00 PM
From: FuzzFace	Read Replies (3) of 3558

You are correct in your understanding of how options work. Tyke really missed the boat there. 15-20 years experience in options indeed. It doesn't matter whether the commodity is gold or an equity, writing (i.e. shorting) a covered call is a bet that the price of the underlying commodity stagnates. Writing a naked call gives you a fixed profit but exposes you to the unlimited risk of the commodity appreciating in price. Writing a covered call eliminates the risk of unlimited appreciation, but introduces the risk of finite depreciation. Writing covered calls is just a fancy way to cut your profits and let your losses run.

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