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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Robert T. Quasius who wrote (50991)	4/3/2001 9:04:16 PM
From: Ira Player	Respond to of 77400

I've never written a call against a stock that wasn't already a long term hold, so I never considered that issue. Does the 'hold' apply even if the option is not in the money (ITM)? I understand that a deep ITM (DITM) sale can be considered a 'constructive sale' and trigger a taxable event for the underlying stock. As for the stock rising and getting assigned, another alternative is to 'role them out' if you feel the rise is now going to continue. Remember, when you sell an option with time left before expiration, a significant portion (preferably ALL) of its value is extrinsic (Time) and little of it is intrinsic (Stock minus strike). Near expiration, most (all late in the day of expiration) of the extrinsic value is gone and you only have to pay for the intrinsic value to buy it back. For example, your stock is selling at $50 and you feel it is going to remain relatively flat. A 50 strike call 2 months out is priced at $5 so you take it. 2 months later, the stock is at $56. Rather than get assigned, if you feel your initial evaluation was incorrect and the stock may continue up or hold at this new level, you can buy back your original short call for near $6 on expiration Friday and sell a 55 strike 2 months out for $5.5 or so. Maybe, if you've gotten a bit more bullish, sell the 60 strike further out for $6. You get back some of the potential you thought you had sold. If the stock later falls back to it's $50 point again, rolling out can cost you. Ira