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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (180436)	3/18/2005 2:42:58 AM
From: Amy J	Respond to of 186894

GV, RE: "That's why I think a lot of people misunderstand the risk involved in their own portfolio in regards to a covered call. There are two separate trades in a covered call. You are long the stock. That is a bullish stance. You are short a call. That is a bearish stance." Assuming OTM CCs & holding the underlying shares, the risk is you are forced to sell your shares at the strike if the CCs don't expire worthless or if you are unable to roll it over (two distinct steps of closing a call and opening a new one.) Have you seen scenarios where you can't close out a call because there's no one on the other side? If a stock jumps 50% in one day and stays there so you can't roll it over but get called, you get stuck with only a 10% gain instead of 50%. Additionally, to get back into the stock you have to pay substantially more money to hold the same number of shares. The higher the volatility the higher the risk for this to occur. Are there additional risks? I wouldn't be surprised if there are. The flip side if one had sat on the stock and didn't do anything when it was in a trading range during a recession, one would have inflation eating the portfolio. Regards, Amy J