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Technology Stocks : America On-Line: will it survive ...?
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To: Nasty P who wrote (4044)7/18/1997 12:44:00 AM
From: CLAUDE JOHNSON   of 13594
 
NP,

My logic on selling 1/98 90 calls is simple:

I really wanted to get my 70 puts for free (because they were overpriced). I looked out at 1/98 because premiums were quite high. I decided on the 90's because of the risk factors. Although I don't believe that the stock will rise, I was wrong before. Jim has also pointed out on several occassions that the control of the stock, for the most part, is in the hands of a few major short players.

Selling calls is "Just Plain Stupid" in most peoples books because of the risk. I tend to agree to a great extent, unless you have a good plan to manage the risk. I will buy the calls back at certain stops based upon their price and the time remaining. (No stops in with broker, I just follow closely on a daily basis). I've sold some calls in the past (already once on AOL) and a bunch of puts as well. I know how to manage the risk, and with this one managing the risk is simply selling the calls way out of the money and making the premium.

BTW, I will be buying the calls back when they decline $1.50 - $2.00. Close to buying them back now! I don't see them going much below $3.00 even if AOL slips another 10-15 points, as the time value won't disappear so quick. Makes my 70 puts end up costing $1.50-$2.00 where I wanted them anyway!! Round about, but it works for me (and maybe only me, but I'm like that).
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