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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Sal D who wrote (7662)	8/12/1998 11:17:00 PM
From: Magnatizer	Read Replies (1) \| Respond to of 29382

Joe RE: Investors should not write calls on stocks they believe will appreciate beyond the option break even point. I have to disagree with this statement. If a person is a trader and, for whatever reason, becomes and investor (stock drops past reasonable sell area) then writing calls against stocks which are in obvious downtrends can be a great strategy to lower ones cost basis in the stock. The person can then set a buy signal for when the stock breaks out of the downtrend. It works quite well. No need to let dead stocks give no returns. For a little extra risk (stock being called away early) you get a return guaranteed. just a thought. Oh, and the line about noone knows where a stock is going. I tend to disagree with that. With proper use of TA a person can get a reasonable assumption (greater than 70%) of where the stock will go in the short term. Since I only write CC one month out the short term is my only concern. ht david

To: Sal D who wrote (7662)	8/12/1998 11:43:00 PM
From: Sergio H	Read Replies (3) \| Respond to of 29382

Joe, the premium is the ticket. Covered calls can provide a nice income if the premium is built in. Let's do an analyses on the Sept.10 calls on APCO as an example. Let's assume that we own 1000 shares of APCO bought at 9 1/2. Do we want to sell the Sept 10s ? Oh, I know there is somebody in California that needs to know. And about options that expire worthless. It's true Joe. Most of the options do expire worthless. Options were originally conceived as a hedge instrument and not as a method to play the stock. The main purpose and usage of options is still the same. Options are a tool to protect your investment if you are an institutional player. Most options are bought by institutions....as a hedge, for protection of an investment or to cover a short position. Let's look at the APCO Sept 10s, as a case study. I hope there is such an animal. If not, let's do the Oct. 10s. Amigo Mike should be very helpful in this study. Sergio