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Strategies & Market Trends : Technical Analysis - Beginners -- Ignore unavailable to you. Want to Upgrade?

To: Tom Halkar who wrote (8835)	10/26/1998 8:21:00 PM
From: jebj	Read Replies (1) \| Respond to of 12039

>Regardless of what happens with the stock price you get to keep all the premium if you hold it to expiration. Now let say that your covered call bought you in $500 premium (500 shares $1option premium, which is 5 contracts). The MF(Mutual fund) decide to dump the stock and you just loss $1000 in one day and looks like the stock will tank some more. You have two weeks for expiration and you do not want to hold the stock anymore. First thing you have to do is buy back the options to release you from your commitment for giving someone the right to buy your stock at a certain price. The option price is now 50 cents (500 shares x .50= 250, plus commissions). Now you can sell your 500 shares of xyz at a loss.< My assumption on the above was that it was a stock you were going to keep longterm so the ups and downs do not really come into play - until you wish to sell, that is. Also, is it not true that just becaues you sold a covered call it does not mean that you can not sell the stock - only that you are committed to supply it is called. With the stock going down, could you not sell if desired and if it turns around, buy it back to be able to honor the call if need be? In other words, go naked and cover if you have to at a lower price? >That why you need to know TA well so you don't pick the dogs and timing is everything.< I am well into Pring's book now - a LOT to learn! :) >Again, it my opinion that this is the time of year that the MF rotates their stock and can be a volatily time and not for the weak at heart.< Tks for the tip - I will certainly keep it in mind. >Does that help you?< Yes, again, tks. <<In a straddle, you sell both a call and a put on the same stock at the same time period - Dec. 50. >> >Sounding like a strategy to applied if the stock is trading in a small range where neither options gets excised or buying insurance for not knowing the outcome of the price movement.< Yes - this is exactly when it is used - when you are uncertain which way the market will go or on a stock that has very little movement. But even if it does move, you can win as well it seems. >I like taking positions in stocks that are volatile with good price movement.< Certainly what a daytrader looks for. jb