Cymer (CYMI) Message Board

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Technology Stocks : Cymer (CYMI)

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To: Alex Abuin ?+!=$$$ who wrote (9717)	11/14/1997 3:12:00 PM
From: Jon Siegel	Read Replies (3) of 25960

To anyone...*OT* Options/margin question... Can you sell covered calls on stock bought on margin? I'm asking because I'd be happy recouping my losses (in at ave of 30/sh). A strategy I just read about enables you to recoup at about 1/2 move back to your cost: buy equivalent # of calls to equal # shares you currently own, at as close to current price as possible (strike price at/close to current price). Then sell double that number of calls at a higher strike price (I think at about 1/2 way to orig cost, but have to go through the numbers). The sold calls are covered 50% by the shares you own, and 50% by the calls you purchased. The sale of the out of the money calls should come close to covering the cost of buying the purchased calls, so net cost is very small. On the move up you gain on the shares you own and on the calls, until you hit their strike price. So you limit your upside, but recoup losses at a lower price than orig purchase. This is only good if you expect the stock to move up a bit, but maybe not reach orig cost for a while. Any thoughts on this?

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