The Justa & Lars Honors Bob Brinker Investment Club Message Board

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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: Trebor who wrote (1844)	10/27/1998 7:52:00 AM
From: MrGreenJeans	Read Replies (1) of 15132

Bob The problem is if the price of the equity rises the call gets assigned and your stock is taken away from you by someone else. Bob, I stand by this statement. Opportunity cost, the cost of not benefiting from a takeover for example, because your stock has been called away is a real risk in a position like this. Ain't necessarily so. In about 5 years of covered call selling, I haven't yet had a stock called away prior to the expiration date. Yes it can happen; just hasn't happened to me. Yes, it is so. I have extensive professional experience in this area. Options are exercised all the time depending on your strategy against beginning and professional investors alike. One must fully understand the implications. Some options get assigned some are offset others expire worthless. I am not saying you cannot benefit from these positions but I am saying you must know the implications...the maximum loss and profit and breakeven points of every position. These three variables are known for every option position. If the risk is open ended you know that too before putting on a position (e.g. in the case of selling a naked call)

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