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Anybody out there in Fool Land give me any help or info??????????????????
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No. of Recommendations: 1
Anybody out there in Fool Land give me any help or info??????????????????

Hi,

I suppose, "don't do it until you understand a lot more," isn't a satisfactory answer.


Definition

covered call
http://www.investorwords.com/c7.htm#coveredcall
The selling of a call option while simultaneously holding an equivalent position in the underlying security. see also covered put, uncovered call, uncovered put, writer.


Resources

Options - Fool FAQ
www.fool.com/FoolFAQ/foolfaq0055.htm
Chicago Board Options Exchange (CBOE) Learning (web site)
www.cboe.com/LearnCenter
Options - You Make the Call discussion board
http://boards.fool.com/Messages.asp?bid=113013


Fool On,

Keith O'Malley
TMF KGOMalley

Motley Fool Select
Find tomorrow's leaders today! The Motley Fool Select uncovers the market's best investment opportunities each month, with stock ideas for all investment styles.
www.foolmart.com/Shopping/Product_View.asp?PRODUCT_ID=MF4200_01&ref=CSBO02111
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Ditto Keith's advice on not doing anything until you understand a lot more.

When you write a covered call you are betting that the short-term movement of the price of a particular stock that you own will be down.

When you write one covered call you are selling to somebody the right to buy 100 shares of stock that you own at the strike price in the call contract.

If the price of the stock that you own goes down over the term of the contract, the call will expire worthless and you will have the extra cash from the proceeds of selling the call. However, if the price of the underlying stock goes up you might be forced to sell the stock.

Brian
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See the following article:
http://www.investopedia.com/articles/optioninvestor/071201.asp

hope that helps,

cory
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You can get idea of what it is etc. on url that others posted.

Here are some info that may or may not in url, but not documented that well from what I remember.

1) options are illiquid and buy/sell spread is around 0.20
even with 1million shares/day trade popular option may only
trade in 30 contracts all day.

2) Option sort of force you to lock up when you want to sell the stock.
For example, if you know stock will fall and want to sell them, you have to close option (lose 2x commision PLUS 0.20 premium) then you can sell the stock.

3) Those stock with high and tempting premiums are sure sign that
it has GOOD chance of drop in price. High premium means stock is highly volatile. ie. people are willing to pay high premium since they believe RISK of owning stock is too great.

4) Remember that option traders tend to have little more knowledge than an average stock investor. You are betting against them.

On the PLUS side.

They say about 7 out of 8 options worth less than started amount.
If you are long term investor who would otherwise been holding
stock anyway, then FIXED and decent return might be very good.








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