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 : Semtech -- Ignore unavailable to you. Want to Upgrade?

To: Sword who wrote (728)	1/24/1998 8:16:00 PM
From: AreWeThereYet	Read Replies (1) \| Respond to of 886

Jerry, Thanks for your info... >> I sold 5 Feb 22 1/2 contracts to cover 500 shares when the stock was selling for about 22. I received $828 for these. Two days later I bought them back, thereby negating or cancelling the contracts, for $575. << So you are writing covered calls at 22 1/2 and collect the premium. When SMTC fall, the call's value decline and you can buy them back at a cheaper price. If the price move up above 22 1/2 then the person can exercise the option and you lose your 500 shares SMTC at $22.50 but you still keep the premium. Any misunderstanding? Now back to my question: If I don't already own any SMTC and I feel comfortable to buy them at $20 for long term investment. Instead of placing the buy order, I write nake-put at $20. If the price never fall below $20 then I keep the premium but I end up with zero share of SMTC. If the price did fall below $20 and the option is exercised buy the owner then I have to pay $20/shr regarding the market price of SMTC. The risk is when the put is in-water and I don't have enough money to buy all the shr at $20 then I am in big trouble. The good point is the worst case scenerio is knew beforehand vs you never know how much money you lose in the case of writing nake-call because you never know how much the stock will rise. Am I getting the right idea? My investment account only permits buy/sell options. So is "selling options" which I don't own equal to "write the options"? Thanks aC