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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Carmine Cammarosano who wrote (23530)	11/14/1997 7:57:00 PM
From: James A. Shankland	Read Replies (1) \| Respond to of 61433

Selling calls after a stock has taken a beating, is not wise.... Selling covered calls after a stock has had a big run makes a lot more sense, don't you think? Indeed. Unfortunately, ASND hasn't been particularly co-operative in that respect lately :-). I'm not necessarily recommending that anyone do this; it's just one of many possible strategies. If you believe ASND is going to appreciate by well over 30% over the next 14 months, you should just hold the stock. If you are convinced it's going to tank further, you should sell now. But if you're not sure either way, and you want to hedge, then writing a covered LEAP is one way to go. Upside potential is limited to 30% in exchange for a major mitigation of downside risk. Technically, you are incorrect in saying, "Selling calls after a stock has taken a beating is not wise." What a stock has done is irrelevant: it is what the stock will do that counts. Thus: "Selling calls on a stock that will rise sharply is not wise." I will freely concede that it is easier to tell what a stock has done than to tell what it will do :-). (Which is precisely why a hedge, where you make decent, if not spectacular, money across a wide range of possible outcomes, can be attractive.) Anyway, gotta get back to work; forgive the digression!