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.

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

To: George Coyne who wrote (30454)	1/15/1998 12:54:00 PM
From: James A. Shankland	Respond to of 61433

Re: What to do about Jan99 45 covered calls sold for 1 1/2, now 2. I've actually been thinking about this, as it's not a trade I would have made. I think it really depends on what your goals were when you wrote the call, and what your goals are now. If you're a long-term investor, and you're planning on holding ASND at least a year, then with your current position, your upside profit is limited to 57% or so over the next year. If you think there's a good chance that ASND will move up by more than that, then close the option now for a mere $2, and chalk it up to experience. If you think it's unlikely that ASND will appreciate by > 57% this year, and you're willing to take the risk of foregoing additional profit above that mark, then let the option ride. Chances are that this option will trade both higher and lower than its current price during the year, so you could also wait for an opportune time (lower price) to close the position. On the other hand, you're not going to save that much: even if the price of the option drops by half, you've only saved a dollar. On balance, I wouldn't worry about timing this one too precisely: it's too far out of the money to be very volatile. If you're looking to profit from options volatility by trading more frequently, then write calls with shorter expiration and not as far out of the money. For example, you can get about 1 1/2 for the March 35's now. If ASND moves up that far, and you get assigned, you will have made 23% in 2 months. Sorry to be inconclusive, but I think you really need to answer 2 questions: (1) what was my goal in writing the Jan99 45 call; and (2) have my goals changed? If the answer to (2) is "no", then I'd keep the current position.