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Before you put on a trade there has to be reason for doing the trade. Greed
is not a reason. If you own the stock there must be reason. Is there some
fundamental reason you want to own the stock and you are selling the call for
income while the stock sits dormant or retraces in price. If you want to
reduce risk buy the 30 or 27.50 call and write the 32.5 call against it or
the 35 call. If you want to own the stock and write the call you have
decision points for action and technical indicators would be the keys to
their instigation. If the stock goes down below 30 do I sell the 27.50 or 25
call stay short the 30 call and buy the 32.5 or 35 call for upside
protection. Is owning a put a better alternative at this point because of the
implied volatility and when the stock starts back up again I can sell a
higher put and take in the short calls. Always looking for a situation with
limited risk. If you can handle the risk then the profits will take care of
themselves. Ira.
schnakeus wrote:
> Some of you were talking about covered calls awhile back. How do most
> of you handle downside risk in the stock price? You own 100 shares of
> XYZ at $30. Say you sell a 32 strike a month out for $3. The stock
> stays the same or goes up. You keep the premium because of
> deterioration or because it gets called. If it goes down to $27
> your'e even, in theory, although call retains some value til exp. Of
> course if it tanks, you lose. What do some of you do to manage the
> trade? Sell a lower strike call? Have a GTC stop-sell on the stock,
> then buy to close? Any other methodology?
> Opinions and ideas, Please and thanks.
>
> Steve
>
>
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