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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (74377)11/2/2007 9:25:14 AM
From: Jerome  Respond to of 77400
 
Interesting debate here on the relative merits of covered calls vs covered puts. For those interested in these strategies,as well as other option strategies please visit...

Subject 57033

I have used CSCO as an option position for the past year because the option premium is very generous, and the stock is unlikely to collapse.



To: Elroy who wrote (74377)11/2/2007 1:59:51 PM
From: Dinesh  Read Replies (1) | Respond to of 77400
 
To complete your example, had you written a $30 covered call on a $30 stock, and the stock fell to $2 (same scenario), you are left holding a stock which is worth only $2, and you lose $28 per share, minus whatever premium you received for the call.

It's easier when viewed as a payoff diagram. Both have the same risk-reward with respect to the underlier movement.

Regards


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