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Technology Stocks : Advanced Fibre (AFCI) ** IPO
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To: Les Paul who wrote (1328)12/9/1998 8:20:00 PM
From: Vegas  Read Replies (2) of 3299
 
Les Paul,

There is an SI threasd dedicated to the subject and its also where I learned most of my info.

Subject 12574

Basically you are writing calls backed (or covered) by the shares you own. You'll recieve premiums which lower your cost basis for the stock. The cost to you is POTENTIALLY limiting your profit. For instance I sold March 99 $15 calls about a month ago for $1.37 per share (in lots of 100). So for 500 shares you'd get $685 pocket change. (I paid $12 per share minus the $1.37 I got back which makes my net-adjusted cost per share $10.63) Now if AFCI goes above $15 by options expiration in March, bang my shares get called and I receive a price of $15 each. Needless to say if AFCI is $20 at the time I just got beat for $5 a share, however if it is only $14 per share I have made $685 and can write more cc's...

Hope this helps,
JF

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