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Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: AlienTech who wrote (38614)	9/28/2000 3:06:54 AM
From: SpecialK	Read Replies (1) \| Respond to of 43080

Guaranteed that CMGI will not close above 30 come October expiration. With 3 weeks to go and the stock at 26.625, we may rally but the buyer has been suckered IMO. Question: I own X (hundreds) of ABC company at 25. I call the broker to write X calls for the October 25s that go for 2 bucks. I receive the covered call money from who? Who is forced to buy these calls? If everyone wrote covered calls on every stock they own, would'nt whoever had to buy the calls, run up the stock so they could make a profit, of course the folks who write make money, so everyone is happy. By the same token, everyone in a negative mood, not expecting any rallies, so they write calls, the buyer is unhappy because he is losing a lot of money, so he drives the prices so far that even the owner of the stock is unhappy because he keeps the 2 bucks from the covered call but loses 10 bucks on the stock. So, who has to buy these covered calls? How can they hedge these positions? They must do it to protect themselves.