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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Jpres who wrote (6470)	1/16/1998 10:38:00 PM
From: Magnatizer	Read Replies (1) \| Respond to of 14162

Jpres Hope you are so lucky as to have someone pay you $25 for something with a $24 price tag. More than likely you will not get this lucky, if you do treat yourself to something nice on the extra $1 profit and go into the market on Tuesday and buy back your stock for $24 at the open. The only way you will lose is if the stock gaps at the open by more than $1 and never dips back down. Good Luck David

To: Jpres who wrote (6470)	1/16/1998 10:43:00 PM
From: Hunt	Read Replies (1) \| Respond to of 14162

Jpres, If I might intrude to answer. If you sold the January 25 call and the stock closed today at 24, you can pretty safely bet that you will keep your stock. The folks who bought your options have no incentive to buy the stock from you at 25 when they can buy it at the market price of 24. That being said, there are several exceptions, 1) if during today the price floated above 25 and they decided to excircise those options and later the price dropped down to 24. and 2) They are completely irrational and they want to "force" the option seller(you) to give up his shares because they "spent that good money for the options".. Number 1 has happen to me twice, I received notice that the options were exercised before noon on expiration day.(I just repurchased the shares at a lower price. Number 2, I have only heard rumors and rumors of rumors that it has happened to people. 99.999% chance you will keep your shares. For a different senario, I once sold the 7.5 calls on some stock I owned, it closed about 8.25 as I remember it, and it was not called away. Nothing like .75 in my pocket for some one elses's mistake. Kind of like finding a 10 dollar bill on the side walk.

To: Jpres who wrote (6470)	1/17/1998 10:31:00 AM
From: Herm	Respond to of 14162

John, American Style options in this country can be called out at any time! Although, the risk is very low there is ALWAYS the chance of being called out IF certain factors surface. Greg outlined them a few post back. Now, to address your question about being called out at $24 on a Jan. 25 strike price I would say NO. UNLESS, perhaps there is a dividend record date coming up BEFORE the option expiration date and someone wants to lock in that dividend. So, they exercise to grab away from you that payout since they will be the new owner of record. Some large foreign investors do that as a strategy. It's called "dividend stripping" and they go from one company to another like PAC MAN. If you have been following our forum, you will recall that it is critical that your net cost basis (nut) ALWAYS be below the CC strike price to avoid short term losses. There is more risk when that happens. A summary of the major concepts can be found on reply post #2638. Enter that number on the upper right hand corner of the message box to view the rules.