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

To: jebj who wrote (8836)	11/5/1998 2:55:00 PM
From: Tom Halkar	Read Replies (1) \| Respond to of 12039

Jb Have been out of town enjoying my second anniversary with my wife. >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.< You only get to keep the stock if the options is not exercised. What you are doing is putting your stock up at a set price of the covered call. You will keep the premium regardless if the option is exercised or not. >Also, is it not true that just because 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?< Yes, you can sell the stock, however your broker will want you to buy back the options in order to free up your stock to do that. So your stock is tied up until the options are either purchased back by you or the options expired, which is always the 3rd Friday of every month. You usually have to be a season veteran to go naked it on options. Even if that is allowed by your broker they will want you to have the cash on hand in the account. I just want you to fully understand a strategy before applying it. Most book give you the benefits, but don't fill you in to well on the downside. Wade Cook tells you all the wonderful things about covered calls, but leaves these important details out. You sell more books that way. Tom The Windy City