Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Voltaire who wrote (46752)	10/31/1999 10:22:00 PM
From: Thomas Tam	Read Replies (1) \| Respond to of 152472

Voltaire, have just tuned into this debate. My question is how much will the cost of using margin erode into the potential gains you have outlined. If you sell your stock (small amount) to cover/buy back the calls that have appreciated, then the value of your portfolio diminishes somewhat from having fewer shares at a higher price. Yes, I agree with you that the portfolio goes up because the difference between the loss of buying back calls versus the appreciation of your remaining shares favors the long common. In the end, are you making much more than the premium that you sell the calls/leaps for minus the interest costs of buying any additional shares on margin? Look forward to your reply. Later

To: Voltaire who wrote (46752)	10/31/1999 11:05:00 PM
From: MileHigh	Read Replies (2) \| Respond to of 152472

V, Unless I misunderstand, you are losing credibility when you say "everything is cool" when a stock skyrockets while one is covered. This is wrong. Specific example: (because I am thinking of doing it) 1. I sell the Nov230's for 10.50 2. The stock rockets to 250 after earnings due to great news, etc.. 3. My calls are now under water to the tune of around 9.50 (give or take some time premium and volatility premium) 4. Therefore, I can buy the calls back at around 20 or so. thus losing 9.50 on my covered call strategy 5. Sure, my common went up but I lost 9.50 on the shorted calls 6. Is this good when I could have just held the common w/o selling the calls?! The point a few are trying to make is that a covered call position can negate your returns on a runaway stock. AGREED?! I do agree, this is pretty basic and not too much to understand or argue about. Boo! MileHigh