How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: RDHickman who wrote (10043)	3/23/1999 3:01:00 PM
From: NateC	Read Replies (3) of 14162

Dick, Herm, David, et al.....I'm still a little confused I guess....after rereading the LEAPS-CC notes several times. I bought 4 contracts of AOL LEAPS yesterday, Jan 2001 80 Calls.... I also own some AOL shares...and it turns out to be 400....so I can write CC's on 800 shares...400 LEAP, and 400 long. Now on my 400 LEAP shares, if I should write 4 Contracts of April 130 (stock is at 123 today)......and if I should get exercised next month....I'm still trying to be sure if: A. My broker covers the CC exercise of my written 130 CC's....by exercising the LEAPS...which wipes me out, and I lose $34/share.....a huge loss.........OR B. Does my broker cover the CC exercise of the 130 strike price CC's....by selling my LEAPS at market...which would probably be OVER the $34 I paid for them....and would hence add to my profit from selling the CC's??? I'd appreciate anyone clearing this up for me....and if you want to use an example.....it'd be great. I know that I could buy the CC back before expiry...but need to know what happened if exercised.

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