Your point overlooks the possibility that they want to be called at a net of $36 per share.
With all due respect and honesty, your philosophy in regards to the merits of writing covered calls needs some serious revision. It is exactly the scenario I have proposed that would clearly explain why Goldman was doing what they were doing last week.
I'm not trying to take shots at you on this. But my logic is undeniably accurate in this regard. I don't know how long you've been following my posts on this subject, but go back and read the full context if you haven't done so.
Wow. I'm dealing with someone who's logic is undeniably accurate...
Seriously, I followed your "logic" from the beginning, when you accused GS of pumping the stock and then writing calls and watched you say that covered call writing is done when you are bearish on a stock. My counter-point is that if you are bearish on a stock you don't write covered calls on it, because you don't own it to write the covered calls. (Individual investors who have to deal with tax consequences of selling are in a different boat).
For GS to write the covered calls they have to be somewhere between short-term neutral and short-term mildly bullish. If they were short-term bearish, they wouldn't have bought that million share block last week,they would have held off until they were neutral or bullish. When they wrote the calls, they figured that the stock would not go down by an amount that exceeded the call premium they received, else they lose money on the proposition. They probably decided (and this is just a guess) that the stock would be short-term flat and they could pocket extra premium, and if the stock did happen to go to 35+ by expiry (2 whole weeks away) then they get called and get like 10% return in two weeks, which is fine by them I'm sure.
Your "scenario" where GS pumped the stock for the purpose of writing CC's is thoroughly ridiculous. There, I'm denying your logic. Had they pumped the stock and then SOLD STOCK, I'd agree with you. But not seling calls. Different ballgame altogether.
-Mike |
