3Com Corporation (COMS) Message Board

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Technology Stocks : 3Com Corporation (COMS)

COMS 0.00130

-18.8%

Nov 7 11:47 AM EST

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To: Chris Anderson who wrote (10739)	11/23/1997 5:46:00 PM
From: Greg Jung	Read Replies (1) of 45548

Beachbumm, Chris If you want to hold stock but then sell the call then your statement by action is, "this stock is full. No more upside for a while". You are also claiming "if this stock begins a free-fall I can wait for it to rebound because it always does, and always will." If you're making a lot of money by writing calls it is because the underlying stock is volatile, which means down as well as up. If the price of the stock drops $5 from $60, a call at strike $60 will drop less than $2. If you can't go naked you would have to buy back those calls before you can sell your stock. And the options auction is much slower than stock, and has high spreads - you have to use limit orders to get any sort of decent price. If you think the market may tank your stock but you are waiting until April or so to qualify it as long-term gain, you can sell an in-the-money call with strike well below the price. This call does get cheaper about as fast as the stock. You are still not protected, because say for Cisco the price could go below that price even more. So you would need to buy puts with proceeds from the calls. Greg

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