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

To: Dominick who wrote (3155)	12/20/2001 6:00:56 PM
From: Dan Duchardt	Respond to of 5205

Dominick, It would be a mistake to think if you buy a stock for $50 and sell a call for $2 and the break-even point is when the stock reaches $48. That's not always so because you have to buy the call back then sell the stock. Right... The breakeven point I refer to is the breakeven point for the call buyer, not the seller, and at the time the option expires. It is the strike price plus the premium because the contract allows the buyer to purchase stock at the strike price. Breakeven for the buyer is the net cost to buy the stock plus the premium paid for the right to buy at that price. But like in the case of the seller, if the stock reaches that price early it is not really the breakeven point. If the stock runs up early, the option should be worth more than it cost and can be sold for a profit. Dan