Writing covered calls

RickB rberry883 at comcast.net
Fri Feb 13 07:57:28 PST 2004

Earl Smith wrote:

> I found a stock selling for 42.76 - this stock looks to be on the 
> rise.  The April 42.50 call last sold for 2.55.  If I buy the stock 
> for 4276 and sell the option for 255, my cost basis in the stock is 
> 4021.  If the option is exercised, it seems to me that I have 229 
> minus commissions.  I think I recognize some of the potential 
> shortcomings for this strategy - the stock might not rise enough for 
> the option to be exercised, or the stock might fall, in which case I 
> wouldn't be called; the stock might rise enough for me to have made 
> more money buying the stock and selling it at a profit; I might not be 
> able to find a buyer for the option.
> Are there some other pitfalls that I don't see?
> Thanks,
> Earl Smith
> t_esmith at hotmail.com
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Why don't you give us the name of the stock and we'll investigate it for 
you. We wouldn't want you to make a bad investment.


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