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Author: GREYFOX Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35363  
Subject: Re: Future balloon payment Date: 6/8/2004 8:08 PM
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"I'm not looking for no market risk. I could achieve "no market risk" by just paying off the mortgage now. A 5% to 7% return requires some risk (obviously)".
Not having sufficient data re your'e circumstances I will not make a specific rec. However if you purchase a AAA common stock and go into a covered call writing strategy you should be able to achieve a return of close to 10%. If you do a few sugestions. 1.Buy a divd. paying stock which is nuber one or two in its busisness segment and has been profitable for at least the last 5 years.2. Writ leaps somewhat above the then current market-I normally go to either one or two notches up. 3.DO NOT attempt to trade around the position unless you are a VERY experienced in options as the spreads and commissions are substantial. 4. If in Dec stock is well above the strike price buy in the call and take the Tax Loss-while you will have a tax loss the increase in the value of your'e common stock will almost always exceed the loss in the call because you will have pocketed the premium due to the decrese in the time value of thge option as well as the fact that it is by definition now "in the Money".
The real danger is what to do if the stock goes down by an amount equal to the premium you have recieved-ans.-sell the stock but you may have to buy it back if it bounces back upto the strike price. If this all sounds like it requires attention-well it does.there is no free lunch. I can tell you that covered option writers over the years have done very well-no home runs but steady growth of between 7% to 20+%(in 98 and 99),with most years coming in at low double digits.
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