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Strategies & Market Trends : Z Best Place to Talk Stocks

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To: aniela who wrote (47606)	4/8/2003 12:22:12 AM
From: BWAC	Read Replies (1) of 53068

<Tying up a lot of capital, nooooo ?> Not really. You can always close the option out. In the case of a covered call and a rising stock price, I'd say you should almost always be able to do so at a profit. Profit as in collecting some from the time premium sold. The stock will move more than the option by a certain ratio. Example: Today: 1000 XYZ bought at $10. Sold Jan 2004 $10 strike Leap for $3.00 Market ramps overnight on who knows what fantasy.... Tomorrow: XYZ is at $12. Jan 2005 $10 Leap is now $4.25. Action: Sell stock. Buy Leap Back. Net $12 less $4.25 = $7.85 Gain: $7.85 net proceeds less ($10-$3)net cost = .85 cents per share.

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