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Subject:  Re: TXU buyout - it's times like this... Date:  2/24/2007  7:02 PM
Author:  wolsey1 Number:  7948 of 11351

When TXU gets called away at the March expiration in three weeks, it'll leave me with a gain that works out to be 41% annualized; had I not sold the calls then I'd have been able to participate in a much larger gain.

The psychological aspect of covered calls causing the investor to miss out on a large jump in share price was the purpose of the original post.

So if the stock is called away, will you repurchase the stock and immediately sell calls against them? ... I am trying to get a sense of how determined you are to repurchase stock and sell calls against it over and over again, regardless of what price the stock is trading at.

I'm certainly not interested in chasing the stock. I guess I'm not clear on why you're asking this; personally, when the stock is called away I usually then move those funds into a new covered call position in a different underlying.

Even if you are determined to repurchase stock and sell calls each and every month, the annualized figure you describe will be a pipe dream

That annualized figure was to give the reader a frame of reference for that particular trade, in the context of the original post. I guess I could have worded it in terms of getting an approximately 7-point gain rather than the 18-point gain I would have had I not sold the calls.

I'm not making an argument for the use of 'annualized gain' as a metric with which to compare and follow covered call positions.

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