The Motley Fool Discussion Boards

Previous Page

Investing Strategies / Options - You Make the Call


Subject:  Re: TXU buyout - it's times like this... Date:  2/24/2007  2:08 PM
Author:  TMFHamp Number:  7945 of 11357

<<I'm assuming the stock will move and that the short calls will be exercised>>

So if the stock is called away, will you repurchase the stock and immediately sell calls against them? If your calls get exercised because the stock skyrockets, wouldn't you feel a bit hesitant to repurchase an overpriced stock?

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.

And if the stock falls, the calls aren't exercised but expire worthless, will you sell calls at a lower strike price hoping to recoup any loss?

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 if the stock declines in value by more than you receive in option premium.

Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us