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: NateC who wrote (10307)	4/11/1999 3:36:00 AM
From: Hectorite	Read Replies (2) of 14162

AOL crashes to, say 140 in that month.....so I buy them back for $.75, and sell the stock at $140.....(which BTW is 12.5% lower than 160). Nate, Your last point makes me believe that everybody should get their broker to clear them to hold naked call positions, because what you really would want to do in the "tank" situation is sell and just let the call go worthless. I guess you need to satisfy your broker by covering up the cc which is so dumb (on the broker's end, not you Nate!). They would have gladly let you sell aol short back when you went long, and THAT sure wouldn't have worked out so hot, yet they don't trust you to hold a naked call 20 bucks out of the money. I don't get it. Another negative to closing out the 170s is .75 is probably about the right therotical price in your scenario, but that doesn't mean you can get it. Probably in very active options issue like AOL, you'd be ok, but it would have suck to pay a buck and change just to close it out in the timely fashion you require to get out of the stock (before it goes to 120). H.

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