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Technology Stocks : INTEL TRADER
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To: Chris who wrote (5193)1/24/1999 9:46:00 AM
From: Gersh Avery  Read Replies (1) of 11051
 
Chris

I haven't even paper traded this one.

Worst case would require the person to own 9500 shares of the stock and have $611.5k cash to do this set of ratchet sell.

That said .. at the end of the series you would have 7500 shares of the stock put to you at an average price of 79 2/3 reduced by the premiums collected = ~68 9/16.

BTW Error in the last set of numbers that I posted. There were 20 contracts sold at the 85 strike not 10.

Now additional considerations .. profits from sales of covered calls are tax free. In addition the shares put to you at higher prices than current could be sold at once and produce a tax loss .. You then have more cash in your account than you started out with and a paper tax loss. (I'm sure that Berney will correct me here if I'm wrong)

So then .. worst case:

9500 shares and $611,500 cash to start .. and if you're at a place in life that you could do that and your broker requires you to put up that much .. welll .. IMHO it's time to find a new broker.

Returns : $26k cash and (9 2/3 * 7500) $72.5k tax loss (I've got no idea of the tax implications of the tax basis of the puts that were sold .. Berney?)

"I've got to much time on my hands .." <g>

No .. I've never sold a single option.

See my next post later.

Gersh
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