Conservative:.....Sell Feb 99 110 Covered calls @ 2 7/8 or better.
Concerned:........Sell Feb 99 105 Covered Calls @ 5 or better.
Panicked:.........Sell Feb 99 100 Covered Calls @ 7 7/8 or better.
However, if CSCO recovers prior to Feb 20 and exceeds the strike price, you will loose [sic] your position.
You will not lose your position if you buy your calls back. If you really sold Feb99 105 calls for 5, and CSCO was at, say, 106 1/2 on Feb 19, why would you lose your position when you can buy your calls back for 1 5/8, earning a handy 3 3/8 profit? Of course, if CSCO goes way up in the next two weeks, it could be pretty expensive to close the short call position.
Also, there are tax issues around writing in-the-money covered calls against a stock, if you'd like long-term capital gain treatment on the stock. Covered call writing is a perfectly reasonable strategy, but I don't think of it as damage control. If you're a long-term CSCO holder, and would like to continue to be one, don't write covered calls unless your pockets are deep enough to cover a possibly substantial loss when closing your call position.
I do agree with you, though, that "all is not lost."<g> |
