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.

Non-Tech : The Critical Investing Workshop -- Ignore unavailable to you. Want to Upgrade?

To: Voltaire who wrote (5272)	2/27/2000 4:13:00 AM
From: elpolvo	Respond to of 35685

re: Questions anyone? <the wheels in polvie's haid begin to spin. slowly at first, then they pick up speed... faster and faster they spin.> <"hey! i just wrote a $5,000 check out of my datek margin account yesterday to fund my new accutrade account. i still have all my shares intact. i don't owe any taxes because of this. i almost understand what vee man is saying."> <faster the wheels spin... $5,000RMP... $10,000RPM VROOOOOM VROOOOOM> <one of the wheels spins so fast that it comes loose and whaps polvie upside the inside of his haid... OUCH! DAMN!> <"wait!" he thinks. what's this *...no such thing as a margin call...* business??? didn't datek just sell off 1152 shares of my qcom a couple weeks ago to satisfy a margin call??> <"it must have been 'splained in the missing lesson... or it's going to be in a future lesson... que no?... or maybe the perfesser fergot to 'splain it to datek."> -polvie

To: Voltaire who wrote (5272)	2/27/2000 4:24:00 AM
From: Sully-	Read Replies (1) \| Respond to of 35685

Hey Voltaire, I am somewhere in between your >$1 millionaire friends & the $300k friend & I am already margined fairly heavily. I backed up the truck at the end of 1999 on QCOM with margin. I have a bunch of XOM that provides a margin base, but it is untouchable & no calls can be written on it as well, if I want to stay married..... & I do ;-) I have a bunch of GMGC & for now there are no options available on it. My only vehicle is my QCOM shares - 7,400. However, I wrote 20 covered calls last week & bought back 5 two days later. With the HDR news & the CITA show next week, I would think there is a reasonable chance the other 15 contracts will be called unless I buy them back at a loss. I can see how writing ATM calls can generate huge income. However, the problem I see is that you will get called away quite often doing that, particularly with a stock that is volatile to the upside like QCOM. This is where I get confused. If I write ATM calls it is great when I don't get called, but I am going to get called away fairly often with QCOM. If I buy those calls back for a loss, there goes that income, plus more. How the heck do you write ATM calls, maintain the shares & the lifestyle?????? Does this make sense? What am I missing Voltaire? I don't need to generate 8 to 10% every 6 weeks from my QCOM to live comfortably. Heck, with the 5,900 +/- shares of QCOM (assuming my 5 March $160's & 10 March $170's get called away. I intend to replace them with more QCOM if I do), I only need to generate $10k a month to live a great life now (I would live on like 60% & 40% would be for paying margin costs & reducing margin debt). I want to see the portfolio continue to grow & margin shrink. I think I understand your strategy on the front end. I just don't see the back side when you get called away, or take losses to protect the shares. Where's the income at then?? Please excuse my dumb questions Tom. I am just learning the ropes with options. I appreciate all your efforts in explaining your options/stress reduction discussion immensely.

To: Voltaire who wrote (5272)	2/27/2000 7:45:00 AM
From: alias	Read Replies (3) \| Respond to of 35685

V, Let's stay with your friend for a moment. You have put a "real time" situation on the table. 1. He now owns 1000 shares of Cree purchased at 163.000, half value margined. (I'm not particularly concerned about the margin aspect yet but other's might be. Process my concern here) 2. He (you, on his behalf) wrote/sold covered calls on 1000 of the shares and received $16,500 cash. 3. The calls expire in March at a price of ? but assume higher than $163.00/share. 4. Assumptions: a.) The price of cree stays stagnant or goes up but falls below strike price expiration period, your friend still has his 1000 shares of Cree at starting or higher value and $16,500 in his pocket (won't worry about taxes at this point.) b.) The price of cree at expiration is at/above the strike price and the 1000 shares are called away. He's "lost" his shares and potential "profit" from the increased value of the shares had they not been called away BUT he still has the $16,500 in his pocket and $163,000 to start over again. c.) The price of cree at expiration is below, say 153.00/share, the purchase price. He keeps his $16,500 and he still has 1000 share of Cree but currently valued at $153,000 instead of $163,000. He would, at that moment, have a paper profit of $6,500 ($16,500 less the $10,000 paper loss of the value of the stock). So, he begins again starting with 1000 shares of Cree valued at $153,000 and $16,500 cash in his pocket. Scenario and assumptions correct so far? Any corrections, relevant details and considerations that should be injected into this real-time case that might prompt additional follow-up questions. It's raining like Hell this morning in the Smokeys. -Alias

To: Voltaire who wrote (5272)	2/27/2000 7:52:00 AM
From: Clappy	Read Replies (3) \| Respond to of 35685

Voltaire, I have a question(s) for you. I assume the answer is found on Jill's Options thread somewhere... However I'll try to shorten my search by asking it here. How do you derive the proper price to sell the covered call. I understand, there isn't "one" answer. It depends on the amount of money you may need, etc. I find it difficult to determine which strike price is most beneficial. I would guess in saying that it would be ideal if the price was high enough that the covered call never get's exercised. Is it best to sell covered calls during times of euphoria on the market? (Guessing that the market could settle back, making your strike price less desirable...) Do you try to time it with TA? Is part of the goal, not to have the options exercised, so that you continue to keep your shares? What does one do if they are using a non-marginable IRA trading account? ...I got a hundred more questions... I guess I should head over to the options thread and do some reading... Thanks. -CuriousClapper

To: Voltaire who wrote (5272)	2/27/2000 9:49:00 AM
From: Jim Willie CB	Read Replies (1) \| Respond to of 35685

thanks for going out on limb with your Covered Call views to all who pursue the perfection of trading, bear in mind that the goal is a combination of profit, life comfort, and continued income stream my personal intentions are to hone my tactical maneuvers with covered call writing and avoid like the plague any put shorting the months for my focus of CCs will be the other months besides earnings months of Jan, Apr, July, Oct with all this typing, TommyReb, your right index finger is gonna cramp up what are you up to now in speed? 15 letters per minute? / Jim