How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Greg Higgins who wrote (6029)	12/6/1997 1:29:00 PM
From: R. Gordon	Read Replies (2) of 14162

Patrice, I like what you say, but if you had bought vvus at 40 in October (I didn't) and sold calls only to find it quickly slid to 22, it could be painful, especially with a lot of margin. If you sell calls at 22, the stock could suddenly jump to 30 and either lock in a loss or force you to average up. If you averge up, it could slide sharply again. Buying protective puts are great if the stock is trading high - but when it is low, they are very expensive. The odds against this senario is not high, but it does happen. CCs are great but not without some risk. Richard

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