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Usually you do take a double hit by the time you pay spread and commissions on
the options. You are down money on them if the stock drops quickly.
In a message dated 2/8/99 4:22:34 AM Pacific Standard Time, sgold@xxxxxxxxxxx
writes:
> when you sell the stock and buy back the call you do NOT get a double hit
> as you get back something when the stock goes down and time goes on!
> you should only sell calls on stocks you like!!
> and if you do that and age a medium stock picker you should do much better
> just buying stock
> and using a prudent stop and not selling calls to limit your profits!!!
>
> -----Original Message-----
> From: Sigstroker@xxxxxxx <Sigstroker@xxxxxxx>
> To: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
> Date: Sunday, February 07, 1999 2:36 PM
> Subject: Re: returns on various options strategies
>
>
> >Maybe a better example would be one like NSCP. It's easy in hindsite to
> only
> >choose stocks that go up. What would the strategy be for one that goes
> down?
> >What do you do when the stock drops quickly but much of the time premium
> >remains? Take a double hit and buy the options back and sell the stock?
> >
> >In a message dated 2/6/99 4:44:39 PM Pacific Standard Time,
> gary@xxxxxxxxxxxx
> >writes:
> >
> >> If you have the data, it'd be interesting to try simulating a covered
> >> call strategy, on say, HWP (Hewlett Packard) going back to 1994/so. HP
> >> had a strong run up, and recently sold off dramatically, but snapped
> >> back over the past couple of months. Maybe AOL or CSCO would be better
> >> to prove your point about the effect of limiting upside. I think Yates
> >> sold options once a quarter, at the money. Simulating the sale evey
> >> month might be better for a sample of one stock because it will even
> >> out some of the lumpiness in the equity stream.
>
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