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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: edamo who wrote (96435)	2/9/1999 4:01:00 PM
From: freeus	Read Replies (2) \| Respond to of 176387

In the case you just mentioned you KNOW the stock will be called away from you.So you are doing this with shares that are not "hold forever" shares. ? And for anyone: how does one know when its time to buy "on sale" versus, everything is moving down and will move down more????? Freeus

To: edamo who wrote (96435)	2/9/1999 4:11:00 PM
From: BGR	Read Replies (1) \| Respond to of 176387

edamo, This however contradicts your previous assumption that the present market has an upward bias. I can get better than 20%/year in the index fund. -BGR.

To: edamo who wrote (96435)	2/9/1999 6:27:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Actually, your profit is considerably higher if you get called. Because you get cash upon writing the call your initial cash out is $60. Assuming you get called you receive a profit of $40 in two years. That works out to 29% per annum. I worked out this kind of analysis in detail, and the risk is that the stock will be driven much lower than $60, abut you are locked in because of the covered call strategy. The value of the stock will fall faster than the value of the call (delta <1), so if you need to exit you may find yourself losing money. Because of the long time period the loss in value due to time is relatively small up until about three months or so before expiry. You can frequently do much better with short expirations, where with Dell you can write slightly in or out of the money or at the money calls with a hefty premium. For example, you could write a Feb 97 call for around 7 1/2. If the stock is trading at 97 1/2 you get $5 of time value for a week and a half hold. If you get called you have an annualized return of 492%! If you don't get called you bought the stock for $90 (excluding commissions). TTFN, CTC