Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Netopia: Farallon Communications -- Ignore unavailable to you. Want to Upgrade?

To: Gopher Broke who wrote (459)	5/6/1999 8:52:00 PM
From: M. Frank Greiffenstein	Respond to of 522

2 what ifs... GB, writing covered calls is a risk management strategy. It is LESS risky than holding the common. You insulate yourself against downside moves and guarantee some profit. That's under normal stock market conditions. If the stock goes into a narrow trading channel known as consolidation (common after big upward moves), you can mint money month after month by writing then closing, writing than closing, etc... There are 2 what ifs I have to concern myself with: A very big down move and a very big up move. In the big down move, my loss on the common can exceed my profit on the covered call. But in that case, I can buy back the calls for pennies on the dollar, and I still have my common shares to write more calls against. In the case of a big up move, I have simply lost an opportunity for a bigger profit than I already have. But what is wrong with having shares called away if you already have a 300% profit?? That's what I am up in NTPA, adding both the unrealized gains on the common, and the profit on the covered calls. DocStone