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Strategies & Market Trends : You buy a stock. It goes down, now what?
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To: AlienTech who wrote (33)7/8/1998 8:30:00 AM
From: Bald Eagle  Read Replies (3) of 112
 
Personal case study on ADPT using covered calls to reduce loss:

DATE ACTION BASIS PRICE

2/13/98 Bought ADPT at 23 1/8 23 1/8
2/13/98 Sold Mar 25 calls at 1 3/16 21 15/16
3/23/98 Sold APR 22.5 calls at 1 1/8 20 13/16
3/27/98 Bought APR 22.5 calls at 9/16 21 3/8
3/27/98 Sold APR 20 calls at 1 7/16 19 15/16
4/7/98 Bought APR 20 calls at 3/8 19 3/16
5/1/98 Bought MAY 22.5 calls at 7/16 19 5/8
5/1/98 Bought 1/3 more ADPT 21 1/8 20
5/4/98 Sold JUN 20 calls at 1 5/8 18 3/8
5/14/98 Bought JUN 20 calls at 7/16 18 13/16
6/25/98 Sold JUL 15 calls at 2 16 13/16

So ( ignoring commissions ), my basis now for ADPT is 16 13/16
versus the 23 1/8 and 21 1/8 that I actually paid for the stock.
It looks like the JUL 15 calls will expire worthless, so I'll be
getting close to at least break even in the next month or so.
Admittedly, it requires some work and thought as to when to
sell and buy calls and at what strike price, but I hate losing
money. Since I started using covered calls just six months ago,
my overall return has increased.

I would like to have input on buying protective puts. I have never
done this before. The advantages I see are that you don't lmiit
your upside potential but you limit your loss. The disadvantage I
see is that you increase the basis price for your stock.
Please, anyone with personal experience, give us the benefit of
your "education" in doing this.
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