Re: [RT] Managing covered call risk

["Dom" <domenick@xxxxxxxxxxxx>]

Short puts are covered Only if you buy puts at 
lower strike price. Your risk is then limited to difference in strikes plus the 
premium paid minus the premium received. Shorting the 
stock will only protect you to the extent of the 
premium received from the sale of the put. If you short the stock at 30, sell a 
put at 3 , after 27 you are entering loss area.If stock goes to zero you lose 
27. At least you know you cannot lose more than 27.
This is not the same as a naked call. There is no 
limit as to how high stock can go. Short the stock is not same as short the 
call.
Dom
  
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  ----- Original Message ----- 
  <DIV 
  style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
  <A title=bulldog483@xxxxxxxxxxx 
  href="mailto:bulldog483@xxxxxxxxxxx";>Bryant 
  To: <A title=realtraders@xxxxxxxxxxxxxxx 
  href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
  
  Sent: Wednesday, March 13, 2002 2:37 
  PM
  Subject: Re: [RT] Managing covered call 
  risk
  
  Buy back the strike at 32 and sell the next strike lower would be my 
  guess,
   
   
  My question is this can you sell covered puts ,,,short the stock and you 
  sell a put at the next strike down ,,,and with that put you have the 
  obligation to buy the stock back or cover ?
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    ----- Original Message ----- 
    <DIV 
    style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From: 
    <A title=schnake1@xxxxxxxxxxxx 
    href="mailto:schnake1@xxxxxxxxxxxx";>schnakeus 
    To: <A 
    title=realtraders@xxxxxxxxxxxxxxx 
    href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx 
    
    Sent: Wednesday, March 13, 2002 2:30 
    PM
    Subject: [RT] Managing covered call 
    risk
    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.SteveTo unsubscribe from this 
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