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Newbie to options. I have a long position in BTU with an average price of 57/share and own 1000 shares.

I am thinking about a Covered Call strategy to produce some income on the stock. Here are my thoughts:

Sell to Open June 2011 $70 priced around 3.15-3.25
Get 10 contracts to match my 1000 share long position

So if I understand this strategy correctly, I would get $3,150 premium when establishing this position (10 * 315)

If the price of BTU moves above 70/share anytime before Jun11 expiration, I may have to sell my shares at 70/share.

Does this strategy mean I need to hold my position, both stock and options, until expiration?

If the stock moves downward, below my 57/share breakeven price, can I close out this position by selling my 1000 shares and "buying to close" my options position?

BTU has been fairly volatile only establishing resistance at around 60/share in the past month or so.

I guess my main question is with this strategy is : what if the stock starts a free fall, how do you close out the position(s) to limit loss and is this a wise idea with this stategy?
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