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Technology Stocks : All About Sun Microsystems

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To: space cadet who wrote (5931)	12/3/1997 8:20:00 PM
From: Alok Sinha	Read Replies (1) of 64865

Short Term covered calls (more often than not) do not provide the best risk reward ratio. You don't get much of a premium and small price movements can very easily result in shares being called away. Longer term covered calls offer much better protection. You can sell an April or Jun 50 covered call and get 2 to 3 dollars. If the stock gets there slowly you are OK. Even if the stock is caled away you have an app 25% return in 6 months. You can use part of the premium to buy a cheap call much further out of the money to retain any dramatic upside. I have had my shares called away quite a few times on short term covered calls. the 0.5 or $ 1 premium just ain't worth it. Alok

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