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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Electric who wrote (6420)1/14/1998 4:17:00 PM
From: mc  Read Replies (1) of 14162
 
Electric, provided you own the stock that you sold calls for, the following is true:

The type of call you sold is a covered call, meaning you own the underlying stock.

If you wrote calls on all your shares, e.g. you own 600 shares and sold (wrote) 6 covered calls on those shares, you MUST buy back the Januarys before you sell the Februarys.

Now, if you own 600 shares and sold only 3 covered calls then you are free to do whatever you want with the 300 shares not obligated, meaning you could write 3 February calls. However, all the calls you write can not ever exceed the number of shares you own or those calls will be naked calls (which require significantly more cash in the account and experience by the trader than do covered calls).

And the prior respondant was correct in saying if you have sold Jan-10s there is no chance you will be keeping your shares with the stock at 11 1/4. They will be called away.

Gary
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