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.

Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Uncle Frank who wrote (4842)	3/13/2007 3:33:20 PM
From: im a survivor	Read Replies (1) \| Respond to of 5205

Could you not sell some puts that basically cancel out the CC's? Stock goes up, it gets called and you keep profits and premium on stock ( up to strike price) and the CC's, while also collecting premiums on the sold puts in which you are not assigned the stock, since it went up. Stock goes down and it does not get called and you keep your stock, keep the premiums on the CC, keep the premium on the sold puts and get assigned the stock at a lower price. Just thinking out loud here, as qcom is not a stock I mind owning. So, if I sell some puts and get assigned more qcom, it is a stock I will happily take more of.......and wouldnt the contradicting trade, pretty much hedge against each other? With worst case being stock drops ALOT and you are forced to buy (be assigned) at a higher strike......

To: Uncle Frank who wrote (4842)	3/13/2007 6:03:07 PM
From: MJ	Respond to of 5205

I like to keep it simple also------the more conditions I add to the stock the more time I waste looking at charts. Computers cause migraines-----know from experience. Just finished looking at IBM to see if it is a buy again. One can make an argument for it going down or up. Considering what we have been experiencing with the sell offs would not be surprised to see a significant down move in IBM. Preserving capitol in this market is very important. Appreciate the thread-------has me rethinking the use of covered calls. mj

To: Uncle Frank who wrote (4842)	3/14/2007 8:10:24 AM
From: Bridge Player	Read Replies (1) \| Respond to of 5205

<<If I've sold covered calls and the stock spikes, I let myself get called, and buy back when it fills the gap, which generally will happen. If I've written puts and the stock dips, I accept the consignment, because I only write against stocks I like to own.>> Makes sense to me, Frank. No reason to complicate things. And if you are put the stock, and it looks right, you can always sell calls against it if you aren't interested in keeping it as a long term holding. Choosing stocks selling at reasonable valuations, as opposed to bubble or nose-bleed, reduces ones risk considerably. And stocks with nice fat dividends further reduce risk IMO. Good examples are ERF and HTE. Afterthought edit: Unfortunately, such stocks usually have quite small put premiums.