blaine, not correct. If you're long in a stock, and you want to sell, selling covered calls to lock in your
gains isn't a bad strategy at all.
Let me explain. In Goldman's case, they own x number of shares long (hopefully not too long in the
case of Compaq, or they're upside down). They sell covered calls for August 98 at a strike of $30.
Let's say they received $6 in premium per share for the calls. That means they're out at $36 when the
option is called, no matter where it is trading at August expiration (unless it is below $30, and then
they wouldn't get called. I don't think it will be below $30 then).
Now Goldman is either betting on being called, and being out at a net of $36 per share, or the stock
dropping to below $30 by August expiration (a highly unlikely scenario), not being called, and
pocketing the premium.
This is extremely simplistic. Read McMillan, then try to discuss option strategies.
Your previous post (the blank one) was your best thusfar. |
