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.

Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: funk who wrote (3035)	5/13/1998 10:00:00 PM
From: Lost in New York	Respond to of 4969

. . . why any one would ever under any circumstances use a "covered call". I find it perplexing. I have no interest in using options at all, but I am trying to slowly gain in a reasonable grasp of that arena . . . An excellent book on the subject is Options As a Strategic Investment by Lawrence G. McMillan. It's very comprehensive and can be overwhelming, but it explains all sorts of options strategies very well. Dave

To: funk who wrote (3035)	5/14/1998 8:53:00 AM
From: steve goldman	Read Replies (1) \| Respond to of 4969

I would be glad to discuss basics.... covered calls generate income and hedge a position. Lets say you had dell, it runs to 98...you dont want to totally sell it buy you want to hedge the run, concerned about a pullback. you sell some in the money calls, lets say the 75s, you get atleast the 23 intrinsic value and afew bucks premium. If the stock pulls back 5 pts, you are protected. If it moves higher you collect premium. Writing calls workings in a market that moves sideways or slightly higher. If the stock jumps 100%, you didnt need the 3 points premium that badly and if it tanks you shouldhave sold it. But all this is hindsight, after the fact. 70% of calls expire worthless.Thats a pos for writing calls. If they dont expire worthless, you can "roll them out" buy back the short ones your wrote, take a short term loss, maintain position in stock, and possibly write calls going farther out. All you have to do is get it right once, you keep allthe premiums you collected along the way and the stock. You just dont want the "getting right" being that the stock tanked 80%. Regards, Steve