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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Srini who wrote (20230)	4/10/1999 7:19:00 PM
From: taxman	Read Replies (2) \| Respond to of 74651

"near term out of the money covered calls could be cash flowing into your account monthly" true. but what about the cash flowing out? if you own x and sell $100 call for, say, $3, what do you do if x goes to 115 or more before expiration? you must then either buy the call back for at least $15 or lose your stock. on the other hand if x drops 15 points, to, say 82, you don't have that much downside protection and are more or less locked in, assuming you don't want to be naked the call, unless you buy back the call first. covered calls is just a product foisted upon us by wall street to increase commissions. remember a covered call is economically the same as a naked put and the brokers usually advise against selling options naked. covered calls are a great strategy when the stock expires at or near the strike price but, unfortunately, the market is not interested in maximizing your return. you still have almost unlimited risk (except for the premium received) on the downside and have sold most of the upside potential to the call buyer. a much better way to protect against a down market is to buy puts. regards