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: JohnM who wrote (3639)	4/9/2002 3:55:55 PM
From: Uncle Frank	Respond to of 5205

>> Frank will post some numbers which will suggest that if I were not so dumb I could have made $5.00 <lol> Not likely. I wrote my ntap April20s for $1.40 and am waiting for a dime buy back. That would pt us even for the trade. duf

To: JohnM who wrote (3639)	4/11/2002 5:18:31 PM
From: Allen Furlan	Read Replies (3) \| Respond to of 5205

John, what was ntap at the time of the sell? Many participants of the thread indicate an option buyback at lower price as a positive event. The stock price and option price should both be considered in order to determine long term profit. It would be interesting to know the strategies behind the positions posted on this thread. IMHO just trading to take advantage of option mis-pricing is playing against the house in the long run. If an investor takes a longer term view, I belive that profits will improve over that of the short term trader. As an example I believe that the patents held by cien will push the stock above it's current price in the long term. On this basis I bought 1000 shares and sold 2004/10 calls at a net price of 5,250. Also I sold a combination of 2004/20 calls and 2004/5 puts for 2.4x10=2400 My out of pocket is 2850 and the covered call position fully covers the margin requirements of the naked combo. My maximum return is cien between 10 and 20 in January 2004. I believe the risk of downside is greater than upside above 20. If assigned on the puts I will own 2000 shares of cien at a price of 5000+2400=7400 and the stock will be in the toilet.