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.

Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: Canuck Dave who wrote (17084)	8/18/2003 3:28:28 PM
From: TheBusDriver	Read Replies (1) \| Respond to of 39344

<<You sell a call against the amount of stock>> Sounds like you can't lose with a covered call...what am I missing? Wayne

To: Canuck Dave who wrote (17084)	8/18/2003 3:51:58 PM
From: Louis V. Lambrecht	Read Replies (2) \| Respond to of 39344

Uhh? covered call? You write a call against equities you already have (or buy at the time you write the call). Practically, it reduces your cost of ownership. You would do this on equities you wouldn't mind to sell. 1- Equity soars: you are called away, you loose the equity less the premium. 2- Equity goes nowhere, if the strike of the option is less than 3/4 of $ above the underlaying, you keep the premium. And write again. 3- Equity tanks: you keep the premium. And write again. On the contrary you would sell (naked) puts on an equity you wouldn't mind to own. IMVHO, current low volatilities are not the best time for selers. You sell options when the volatility is high, you buy when the volatility is low. Funny is that most brokers are reluctant to let you buy puts (puts are an insurance against falling prices). OTOH, all mortgage companies will want you to pay for insurances on the properties and on your life.