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 : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (17468)	5/13/1998 10:17:00 AM
From: Ira Player	Read Replies (1) \| Respond to of 25960

Actually, unless the stock really runs away, it is possible to write covered calls that would normally result in losing the stock, but roll it out to a future month. For example, CYMI June 20 calls could pull a premium of 1 7/8, with CYMI at 20 1/2. This is a 1 3/8 time premium over the market price. This gives you a net credit of 1 7/8 and an upside "limit" of 21 7/8 for the CYMI stock. When June 19th rolls around, if the stock is above 20, lets say its at 22, it could be called away. However, the time premium is effectively reduced to zero and the call is now selling for 2. If you want to keep the stock, you can select another call, say August 22.5. These still have a significant time premium and will sell for about 2. Buy back the June 20 for 2, sell the August 22.5 for 2 and you "roll out" your position to August for the transaction costs. You still have a net credit of 1 7/8 and the upside "limit" is now 24 3/8 for the same CYMI stock. Examples are estimates, but you should get the idea. Enjoy the ride, Ira

To: Zeev Hed who wrote (17468)	5/13/1998 4:09:00 PM
From: Steve Wood	Respond to of 25960

Zeev, I agree that if you plan to hold a stock through hell and high water writing covered calls can cushion losses in a down market. At the same time, as you mentioned, you may miss some gains in a up market. My only point is that the risks are the same assuming that you compare the two positions on a one for one basis. As Scott pointed out, the temptation to leverage yourself into oblivion is greater with naked puts! Que le vaya bien... Steve