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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: tcmay who wrote (137473)	6/16/2001 3:06:12 AM
From: Amy J	Read Replies (1) \| Respond to of 186894

Hi Tim, RE: "it won't seem like such a good deal, will it?" Why not a strike that allows for at least a 10% growth before being called away, on a portion of portfolio? That portion can move a portfolio. If the portion is called, it's 10% growth (which isn't too good), but if it's not called away, the premium is kept and plowed into more INTC shares (which is good). The game is won if INTC recovers, which is certainly a bet I'm willing to take. Regards, Amy J

To: tcmay who wrote (137473)	6/16/2001 4:44:44 AM
From: Elmer	Read Replies (1) \| Respond to of 186894

-- However, if the stock goes up, in a covered call the stock is taken away at the strike price. Sell a CC on Intel at $30 and watch it get taken away for $30 when Intel is trading at $45 and it won't seem like such a good deal, will it? I see you don't play this game much, or you would know better. Rolling allows one to move up and out to higher and later strike prices without losing their shares. I've never lost a share of Intel and I've been writing CCs for years. Sometime I have to move out farther than I'd like but that's goes with playing the game.

To: tcmay who wrote (137473)	6/16/2001 9:50:45 AM
From: rudedog	Read Replies (2) \| Respond to of 186894

Tim - I beg to differ on your comments on calls. First, a caveat - options trading requires a good knowledge of the dynamics of options, which are very different than equity trading. Also, the risk profile is very different - as you point out, it is possible to develop an unlimited liability with some options plays, and it is surprisingly easy to lose everything you have at risk. Having said that, I have managed to generate nearly a 20% return on my portfolio in 2000 via options plays - needless to say, that is a lot more than the equity return last year - which, for me, was negative. My options plays are pretty simple. My portfolio (except for a small bit of "wildcat" money which is just for fooling around) consists of 10 stocks in about equal proportions. I sell short term near the money calls on half of that position every month, with a 6 to 8 week time horizon, so at any given time more than 80% of my portfolio is covered. I like to sell calls after a run-up in the underlying stock, since that gives the best premiums. If I can, I hold through expiration, unless the premiums drop to nearly nothing, in which case I close the position out and look for a new entry. I watch the issues closely and as Elmer says, if a position moves against me I close it at a loss or roll it out. I don't wait a long time before pulling the trigger, he who fights and runs away lives to fight another day. A third way to manage being called away is to buy the stock back the next time it drops, assuming you believe it is range trading and that you were called away at the top of the channel. Here's how the plan works in a microcosm. In early March of this year, when DELL ran up from 20 to about 26, call premiums on May 30s ran up nicely and I sold those calls against half of my position. Later, in April, the stock actually ran up over 30. I did not roll or buy back the position, since I was at that point willing to have the stock called away at 30 if that happened. Instead, I sold May 32.5s covering the other half of the DELL position. I was not called on any of those contracts, they expired worthless, and I kept the premiums. DELL has been a particularly good vehicle for calls over the years, as when it runs up, sentiment seems to be that it will keep running and the near term premiums go up too. I had some called away in 1999 at 47.5, in retrospect a fine thing to have happened. The return on the two transactions I described was over 5% of the value of the underlying DELL holding over a period of less than 8 weeks. While I suppose DELL could have gone to 50 and left me with only a sale at 30 and 32.5, I follow the company and the sector pretty closely and I considered any sustained price over 30 to be very unlikely. Intel has also been a great vehicle for selling covered calls . The strategy does not address what to do about the underlying equity position, except that it can help to offset declines in the underlying stock price. There are a lot more complex plays that I occasionally execute which have much better returns - I did very well buying SUNW calls in summer of 2000 and selling them in the fall, even though I hold no SUNW stock. But the primary vehicle for my options plays has been covered calls, and they have done very well for me for many years.