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

To: TsioKawe who wrote (271)	4/25/2001 9:14:24 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

Your welcome, Tsio. If you wouldn't mind some advice, I would recommend you limit your cc plays to stocks that you have confidence in and wouldn't mind owning over the long term. Hopefully that will eliminate the fear factor from your decision making. duf

To: TsioKawe who wrote (271)	4/26/2001 12:57:07 AM
From: BDR	Read Replies (1) \| Respond to of 5205

Likelihood of being called away- As long as there is a time premium for the options (the premium that the option is trading at plus the strike price is greater than the market price of the stock) you aren't likely to be called. It would be cheaper for someone who wants to own ARBA to sell the calls and buy the stock in the market than to exercise the calls. But people do unusual things sometimes. <<Would it be beneficial to purchase another 1000 arba at a lower price, and write 10 may 7 1/2 CCs??? or would this be considered a mad move amongst the options traders?>> With a volatile stock like ARBA- siliconinvestor.com you could try to buy on a sell off and then wait to sell calls on a run up. You would have to follow the stock closely, even hourly the way it moves. Probably not the best thing to do to get you feet wet in options. More likely to get your feet burned. dUF and I may respectfully disagree about certain calculations (he is wrong and I am right, if you missed it) but I think we both agree that you should probably start by going long stocks of companies you believe in and want to hold long term. The "worst" outcome with covered call writing is that the stock falls and the calls expire worthless leaving you holding the stock alone. If you are uncomfortable about a stock, don't think that covered calls will make it a better stock. dDR PS- sold RMBS May 20 calls for 1.90 and 1.95 today, though I don't think that I will get any Dumb Award of the Day for that. No doubt Rambus will announce tomorrow that Infineon has capitulated completely and the court case is dismissed. I liked Frank's move on QCOM better, even if he doesn't know what his return really is. (g)