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 : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: Joe Waynick who wrote (99)	8/2/1998 1:53:00 PM
From: David R. Doerr	Read Replies (1) \| Respond to of 355

Dude! I don't have the article, but here is the basic premise. Purchase 100 shares of XYZ today @ 63, sell one XYZ September 75 call at 5 5/8 and one XYZ September put at 5 1/8. You are net 10 3/4 per share in premium income. September rolls around and XYZ is above 75, this is best case scenario. Say the stock falls to 55, your true cost of buying the obligated shares is really $44.25. So your net cost is 53 and change for 200 shares of XYZ. Versus simply buying 100 shares at 63 and 55 for a cost average of 59. If you are moderately bullish on the stock and want to scale into a position, this covered combination makes more sense. Make sense?