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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: FuzzFace who wrote (2634)	5/12/2002 11:42:22 PM
From: tyc:>	Read Replies (1) \| Respond to of 3558

There is a phrase that covered call writers use. It is the "Return if exercised". This is the maximum that the covered call writer can earn. Note that this maximum return is achieved if the call is exercised. These returns are sometimes very attractive particularly in a rising market when speculators have bid up the price of calls. A knowledgeable covered call writer hopes the call that he writes is exercised so that he achieves this attractive return. He sure as hell doesn't want his stock to fall in price. He relies on his judgment to select the optimum strike price. Anyone who writes covered calls in a falling market is almost sure to lose money. Ask people on the covered call thread how well their covered calls served them in the current bear market. Generally they tend to "lock" a person into a losing propositiion.

To: FuzzFace who wrote (2634)	5/13/2002 2:11:35 AM
From: russet	Respond to of 3558

Actually a writing a covered call for Barrick ensures they get a certain price for their gold production.

To: FuzzFace who wrote (2634)	5/13/2002 2:39:47 AM
From: russet	Respond to of 3558

Sorry, first reply was in error,... "Actually writing a covered call for Barrick ensures they get a certain price for their gold production." Should have said, writing a covered call for Barrick ensures they get more for their gold in a declining or stagnate POG environment than they would normally get, as the calls they write were expected to expire unexercised but they get to keep the premium. Many of these calls commanded a premium of $10-$30 per oz depending on the strike price, so it ain't peanuts. They could do this over and over again for the same oz. If the others would read the financial statements,...you would find Barricks philosophy was that they wouldn't write a call, unless they were fully prepared to cover by leasing the gold, or as they may now be doing, committing production to cover the written call.