Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: edamo who wrote (1741)	8/2/2001 9:58:16 AM
From: Judith Williams	Read Replies (1) \| Respond to of 5205

Ed-- until the trend is confirmed...let underlying be called It is difficult to let a stock be called that you have held for a long time. Of course, it's easier to do that in a non-taxable account. Recently, when Greenie lowered rates unexpectedly, I was sitting on SEBL 35 cc's, when the stock shot up to 45. I let it be called rather than cover. I then sold puts at 25 and 30 when SEBL retraced, which I have left in place, given Tom Siebel's dark remarks during the last conference call. This was my first try at selling puts to buy down the purchase price rather than rolling forward calls. Right now SEBL doesn't seem to be cooperating, but I expect some retracement. If not, I'll wait. The aim of this exercise is to get the purchase price to the mid-20s or so. We'll see. --Judith

To: edamo who wrote (1741)	8/2/2001 6:18:42 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 5205

ed a, You make valid points in your reply. Letting the stock go and hoping to buy it back later is the safest approach, but many of the folks here are strongly attached to their underlying stocks and seem more inclined to accept a (hopefully temporary) drawdown than to lose their shares, often writing OTM calls for relatively small premiums. In the particular case of NTAP, rolling up and out to an ATM call avoids the immediate prospect of being called out while being able to capture a decent time premium for a higher strike call. There is no question that if the stock drifts back down, the exchange can be made for a smaller debit, or even a credit if it comes back near $10. But if it stays above $15 letting it move higher will only increase the debit. We agree that looking farther out in time is a good way to avoid these situations. This is especially true for those who really want to hold their stock instead of letting it go. In fact I just bought back some JAN12.5 calls on RMBS that I sold as LEAPS several months ago when I bought the stock. I will probably write another round of long term calls when this rally ends. I recently posted a note discussing the near term vs long term issue. It was the day before NTAP popped, or I would have used NTAP for my example. This is clearly a case where a longer time frame would have been advantageous. Dan