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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Boca_PETE who wrote (7982)	8/22/1999 8:18:00 PM
From: E_K_S	Read Replies (2) \| Respond to of 15132

Hi Pete: You can write covered calls in an IRA account but the hedging strategy I discussed is moot for an IRA account as there is no tax events for sales in an IRA account. Since your employer holds your vested stock in their 401K Plan you CAN NOT write covered calls against that stock. I suppose you could write "naked" deep in the money calls in a taxable account BUT this is more than just a hedge and has much more risk associated with a standard call write strategy. I would not advise this approach. A safer approach and a must better hedge is to sell a similar number of "vested" shares short in your taxable account. You would have to have this in a margin account and you would be responsible to pay all dividends during the period that you are short. Brinker covered many of the hedging strategies on his show but failed to discuss the use of deep in the money covered calls as a hedging technique. I would like to hear any other feedback from this thread on hedging strategies. In summary, as far as I can tell, the only reason why you would want to hedge an equity position would be to (1) postpone the long term capital gain tax event, (2) continue to hold a stock with excellent long term potential and maintain your long term cost basis (ie. asset held over 360 days) or (3) protect a short term capital gain with the intention to convert to a long term capital gain thus incurring a lower tax rate. Hope this helps. EKS