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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (11440)	9/4/2003 1:04:55 PM
From: Kirk ©	Read Replies (2) \| Respond to of 95632

few things have been more frustrating for me than watching a stock on which I had sold Jan'04 oom calls rise above strike and see the call premium double. Too expensive to buy the calls back, so I'm stuck and the money in the stock is tied up till Jan'04. This is a better strategy in a falling market. Consider it CASH in your asset allocation and be happy you got the premium. Example: Rather than sell 200 shares of LRCX at $17.50, I split the sell into 100 shares at $17 and then sold a CC contract for $240. This means I effectively sold the 2nd 100 shares at $19.90 if LRCX stays above $17.50. If I really needed the cash, I could always use the shares for margin, but that is too risky. I prefer to just consider shares that are "in then money" from CCs as cash at the selling price. I'm sure the gal who bought the CC from me is sure happy but I was happy to get $19.90 (effectively) for 100 shares I had planned to sell at $17.50.

To: Gottfried who wrote (11440)	9/4/2003 1:09:53 PM
From: Cary Salsberg	Respond to of 95632

Gottfried, I agree. I would sell out of the money covered calls, 6 months out, when I strongly believe that the strike price is unattainable in 6 months. That was my position in late 2001 and early 2002. I was correct, then, but, since, I have not had the conviction to sell any. Cary

To: Gottfried who wrote (11440)	9/4/2003 8:19:23 PM
From: Sam Citron	Read Replies (1) \| Respond to of 95632

[Selling covered calls] is a better strategy in a falling market. No. If you are long stock in a falling market, the better strategy is simply to sell the stock, not to sell ccs, which will usually have an unattractive premium insufficient to protect you from declining prices. I might sell naked puts, however, in a falling market as a substitute for a GTC buy order, if I'm not going to regret it too much if I don't end up owning the shares. The best time to sell covered calls is in a sideways market, when premiums are still satisfactory and you are happy taking the money to the bank. If you have to cry on your way to the bank because the market has changed direction and your beloved stock is suddenly in fashion, wipe your tears and remind yourself that you're better off than if you had simply sold the stock at the strike. You say the calls are now too expensive to buy back, but look again -- there's probably very little time premium in them if they are deep in the money. If you really have decided you don't want to disturb your long position in the stock, swallow hard and buy back the calls at a loss. Otherwise get ready to say goodby to your stock in January, when it will probably be even more expensive than it is now.