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Strategies & Market Trends : Gersh's Option trades -- Ignore unavailable to you. Want to Upgrade?

To: Joe Waynick who wrote (599)	10/14/2005 12:24:06 PM
From: Gersh Avery	Respond to of 652

Thanks Joe; I linked that post in the header for this thread.

To: Joe Waynick who wrote (599)	10/14/2005 1:40:56 PM
From: kaka	Read Replies (1) \| Respond to of 652

Hi Joe, re: The stock could go down, in which case I’m assigned the stock. I still keep the premiums and I own a company at a lower cost basis than if I purchased the stock outright. I continue selling CC’s (maybe LEAPS) at strikes that ensure a 25%-50% annual return if exercised at some time in the future. Unless a stock specific even drives the stock price way way down, then you're assigned and even Leaps will not bring in enough premium to give you a 25-50% return. If you bring down the strike, you run risk of assignment at lower price than purchase. Then you lose on your original shares and the new shares. If your original intent is a directional play (up) why limit the upside with CC's? If your sentiment is neutral, why buy the stock outright to sell calls? I would limit downside risk by at least selling put verticals instead of naked puts. The Jan 06 22.5/20 vertical has a FV of 0.60. cheers, kaka