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 : Calls and Puts for Income -- Ignore unavailable to you. Want to Upgrade?

To: Jerome who wrote (178)	4/14/2007 1:40:20 PM
From: Mike Buckley	Respond to of 5891

Frank: Your return will be higher, but so is your risk. Jerome: I look for a safe position. (judgement call) I think Jerome's response sums it up perfectly. Without putting words into his keyboard, I think he is saying that he uses his understanding of certain fundamental analysis (such as earnings trends) and technical analysis (such as a well defined trading channel) to reduce the risk that the stock will drop. His judgement is that the risk is mitigated. That's what investing is all about: figuring out something Mr. Market fails to appreciate and combining that with a little bit of luck. --Mike Buckley

To: Jerome who wrote (178)	4/14/2007 2:41:04 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 5891

>> Actually the premiums can be generous. QCOM at 42.55 will net about 2.05 for the May 42.5's . Ah, yes, but that's an at-the-money strike price. I was basing my characterization on your earlier statement of technique: "My preference is to buy the stock at the low end of a well defined channel. And then immediately write a covered call at the next higher strike..." The next higher strike is the 45 May option, which is trading at $1.00, so if your qcom buy/write were exercised, you'd realize $2.45 from appreciation of the stock vs. $1.00 from the premium you collected on the call.