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To: Chuzzlewit who wrote (72747)	10/17/1998 12:58:00 PM
From: Geoff Nunn	Read Replies (1) \| Respond to of 176387

Chuz, I agree with you assessment, though let me quibble just slightly with the statement, So, the limitation on potential gain doesn't seem to be all that much of a stumbling block. The market is saying, is it not, that in return for the high premiums you would earn on the calls, you will bear a high risk that the stock will plunge. Now, I know you respect the market and are not suggesting any free lunch exists here. I'm just pointing out that buying the stock and then writing covered calls is, if we trust what the market is telling us, pretty risky business. I would suggest the case for writing covered calls is stronger when you already own the stock. Let's say you own a large chunk of a particular stock, and would like sell some shares to diversify but are reluctant to do so because of cap. gains taxes. In this case you are going to bear the downside risk whether you write the calls or not. It is in this particular circumstance I believe your statement above most aptly fits. That is, you can still earn substantial potential gains on your position by writing covered calls, and by accepting the limitation are able to gain a valuable hedge and reduce your downside risk. One other thing, I'm buffaloed why you chose to write calls with a Nov. expiration. Any gains you would receive would be taxable income, right? Therefore, wouldn't it be better to write calls expiring in 1999, postponing the tax until next year? Are option buyers willing to pay a premium to get a 1998 expiration? I have the feeling I must be missing something. Geoff