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Strategies & Market Trends : Three Amigos Stock Thread

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To: Sal D who wrote (7662)	8/12/1998 11:17:00 PM
From: Magnatizer	Read Replies (1) of 29382

Joe RE: Investors should not write calls on stocks they believe will appreciate beyond the option break even point. I have to disagree with this statement. If a person is a trader and, for whatever reason, becomes and investor (stock drops past reasonable sell area) then writing calls against stocks which are in obvious downtrends can be a great strategy to lower ones cost basis in the stock. The person can then set a buy signal for when the stock breaks out of the downtrend. It works quite well. No need to let dead stocks give no returns. For a little extra risk (stock being called away early) you get a return guaranteed. just a thought. Oh, and the line about noone knows where a stock is going. I tend to disagree with that. With proper use of TA a person can get a reasonable assumption (greater than 70%) of where the stock will go in the short term. Since I only write CC one month out the short term is my only concern. ht david

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