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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Gregory who wrote (55)	4/19/2001 3:35:49 PM
From: Uncle Frank	Respond to of 5205

>> Any experts here? Is it right to sell covered call in my situation or should I just wait? No expert, just a pilgrim trying to find the road to salvation <gg>. Seems to me, though, that you have more serious issues to address than whether to write calls. The biggie is to decide if you want to be leveraged (margined) on a stock that you feel/fear will retrace by 35% short term. Covered calls are a pretty weak hedge at best, and almost a trivial consideration for someone in your position. jmho, uf

To: Gregory who wrote (55)	4/19/2001 3:53:31 PM
From: FaultLine	Respond to of 5205

But I am scared that I will have to sell my position at price much less than $60 if by the expiration date price will be higher than strike CC strike price You are so deeply underwater on this it would take forever to chip away your basis by selling low premium far-out-of-the-money (meaning safe) CC's. One interesting suggestion I heard a few months ago was to reap a useful tax loss by selling the position out, waiting 30 days, and buying back in -- or -- do just the reverse by buying (doubling) a duplicate SUNW position at the current market, waiting 30 days, and then selling the old one. This is discussed in The Motley Fool's Investment Tax Guide. BWDIK Anyone else want to take a crack at Gregory's question? --fl@i'mgoodatlosses.com

To: Gregory who wrote (55)	4/19/2001 3:59:50 PM
From: Mathemagician	Respond to of 5205

I have SUNW in my account that I have bought at $60.00 on margin. It came all the way down to $13.00. It is about $20.00 now. The call premiums look very attractive and I am tempted to sell CC.. Specially , because I have a tendency to believe that price will go back to 13-15. But I am scared that I will have to sell my position at price much less than $60 if by the expiration date price will be higher than strike CC strike price. Gregory, I would try (difficult as it may be) to forget about your $60 cost basis. CCs are not a strategy for one who is hoping to recover a sizeable past loss. They are more appropriate to someone who is concerned about generating income and hedging against future loss. IMHO, the appropriate thing to do is to focus on making the best of your current situation. If you feel that SUNW will make it back to the 60s, then by all means keep it and don't write any calls, since the climb from 20 to 60 will likely be interrupted by assignment. Judging by your stated belief that it will retest its lows, it doesn't sound like you believe SUNW is the best way to recoup your losses. Why not sell it and put the proceeds into something you feel will go up and not down (even treasuries), or even buy some protective puts? If SUNW does retest lows and you feel comfortable owning it again, buy it back. Otherwise, move your capital to an investment with which you are more comfortable. Fear and greed are things you should work to remove from your investing decisions, though I freely admit it is nearly impossible to remove either completely. M