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Non-Tech : APCO Automobile Protection Company
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To: Prof who wrote (2068)5/2/1998 1:53:00 PM
From: Gary S. LeBlanc  Read Replies (2) of 3351
 
When a stock such as APCO is in a trading range the best option strategy is to sell covered calls. As APCO approaches $15 sell the options that are about two months out against your stock. You receive this sum minus any commissions you pay. If APCO closes above 15 on the expiration date then your stock gets called way at $15 ( not the current price ). This is the most consistently profitable options strategy. As a stock vacillates within its trading range options increase the return of the portfolio. When the stock gets called away it limits your profits, but you've still made a very profitable trade. The difference between selling covered calls and buying calls is like the difference between Tony Gwynn and Cecil Fielder if your a baseball fan.

Gary
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