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To: rudedog who wrote (37663)	11/12/2000 7:10:51 PM
From: X Y Zebra	Read Replies (1) \| Respond to of 64865

Indeed, the placing of the strike price substantially above the basis, (a strategy that would not be out of the ordinary on stocks that have wide swings), would ease the pain of the tax bite. The premium received off of the higher strike price option would be reduced, as opposed to a premium from a closer strike price to where the underlying is trading. But it is a way of reducing the risk of being called away, if one feels inclined to keep the stock. In any case, yes, I agree with your assumption that one should place the strike price at a level in which being called away will not cause pain whatsoever. (i.e. avoid placing it below one's basis). Contrary to what I have perceived from many posters, or even option's experts, I tend to treat the underlying as one transaction, and the option as a completely independent transaction. Each one with its own basis, as opposed as to think as the option as a way of reducing the basis of the underlying, to the extent of the premium received. I belive that the Tax code would agree with me. Then again, I am no expert.