James,
on your CPQ shares, couldn't you just sell the stock and buy just-in-the-money Jan99 calls for exactly the number of shares sold instead of selling covered calls. With this strategy, i would think you would have much more near term protection then selling covered calls. If the stock goes to say 17, the calls you buy would not lose as much dollar for dollar as the shares themselves, and if the stock went up, you'd get just about as much upside as with the shares.
It just seams, with CC you don't get a whole lot of downside protection, and limit your upside. Plus you are locked in for a long period with just incremental gains. For me, I like to sell covered calls that are no more then two or three months out, on stocks that I intend to hold, after they have reached some peak. In that situation, I know that it is highly unlikely i'll get called and since i'm planning to hold the stock long term, it gives me some modest income from the stock.
Is my thinking right on this, or have i been doing to much glue, again? :)
Take care.
- Chris |
