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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: joe smith who wrote (10777)	2/5/1998 9:50:00 PM
From: SJS	Read Replies (1) \| Respond to of 95453

Joe, DO closed at 48 5/16 today. If you want downside protection with a call writing approach, you could sell Feb 50's (bidding 1), limiting your upside to 51, and protecting your downside to 44. Worth it for you? I don't know. What's the raw (not factoring the hold period) return? 6 points /45 price or 13.33% (not counting commission costs). I don't know your hold period. Did you buy the stock long yesterday? If so, then it would be 13.33% max return over 15 or so days (time left until Feb options expiration) if the stock was between 50-51 with the probability of the stock being called at 50 of zero. At a stock price of 51, you could decide to buy the call back with a net gain on the call of zero (but no loss either...except for commissions) and run with the stock "naked long" if it's strong. If you sell for March 50's, you get more protection (2 5/8) but give up anything above 52 5/8. Time works for you if the stock stalls or the drillers tank again. You can also sell deep time calls, like June 60's. You get lots of time for the stock to get there, and since it takes time to do that, you get that time value in $$$ as a seller. Actually you would get about $200 per 100 shares of stock. You could figure the return from the examples I gave you. Again, this doesn't offer alot of downside protection (only 2 points), but you can't have all and have it both ways... Finally, the ultimate protection is buying puts, but that mean outlaying money and frankly believing that the stock WILL go down. I personally like buy/write strategies and have done them both short and long term, with usually good results. Regards, Steve