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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Douglas Webb who wrote (4328)9/2/1997 6:43:00 PM
From: Herm   of 14162
 
You did the right thing Doug. That was one of the cheapest ways to buy some time until you portfolio can get back in balance. Now, do I understand your situation? You have not been writing CCs on INVN nor UGLY. But, you had intentions to do so on UGLY before it turned on you? Here's my two cent worth! Investors that only buy and hold stocks are subjected to more risk and stress. Why, because they can only watch as their stock drops and they "have no control" of the balance in their accounts. Hence, margin stock purchases make the drops even more stressful as it approaches the margin call rate cutoff. That is why I really think CCing is a more conservative way to invest in the market. There is a move for every situation. If the price drops you cover, and move out two and down one strike price. But, of course you have to start with a net cost basis that is lower than the current selling price. If the price moves up and (you have enough of a profit) you want to lock in your profits you could always short against the box. That is really nice if you have a CC coming due and is out of the money and you plan to liquidate the position anyway. That would be a smart way to use your margin. You're learning Doug!
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