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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Sundar Rajan who wrote (17850)	2/22/1998 10:02:00 AM
From: Andreas	Respond to of 97611

When you write longer term calls the rate of return diminishes because the premium over time is less per time unit. For example, selling a call nine months out will yield less premium per month than selling nine consecutive calls over the same nine month period. Are you not concerned that this longer term strategy (a) reduces your return vs. a short-term strategy and (b) locks you in somewhat if the stock should start to tank? What I mean there is - if cpq were to start dropping after you sold a covered call for say nine months out. The only way out is to (a) hold on for a recovery which may or may not materialize or (b) buy the call back and sell cpq at a loss. The probability of cpq tanking is less over 30 days than it is over nine months.