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

To: JohnM who wrote (774)5/24/2001 4:15:13 AM
From: Dr. Id  Read Replies (1) | Respond to of 5205
 
Clearly, at least with these numbers, it's a wash. Have I done something wrong?

John

That looks correct. What you're getting by selling in the money calls is the downside protection below 10. It's basically the same as selling the stock at today's price. It makes sense if you want to delay a sale (say for tax purposes) and have some downside protection.

Or, if the stock dips you can buy your calls back for a smaller amount...and wait for it to go up a bit and do it again, thus further lowering your cost basis.

Dr.Id@atleastIthinkthatshowitworks.com



To: JohnM who wrote (774)5/24/2001 2:10:09 PM
From: BDR  Read Replies (1) | Respond to of 5205
 
<<Have I done something wrong?>>

No, you are right. In this case the trade wouldn't be worth doing. There is a small profit at the prices quoted but, with 200 shares and 2 contracts, commissions eat that up. This example demonstrates the point I was making in my earlier post about commissions.


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