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: VincentTH who wrote (6261)	12/30/1997 7:45:00 PM
From: Linda Kaplan	Read Replies (1) of 14162

Vincent, You simply have to have the cash buying power to buy the calls, which means, since you are low on cash, that you should perform the sell first. Then you should have the cash. If they are saying your stock buying power is almost zero, you do not have the cash for the buy order -- at least you don't have it in that account. So, sell first, use the cash generated from the sell for the buy. But keep this in mind. If you're using margin, when the value of the margined stocks go down, your buying power goes down. Also, you have to pay interest on your margin, which is deducted from your cash. So you don't want to sell the calls, end up having the sell money go toward paying off margin debt, and then still not have the cash available for the buy part of your spread. Linda

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