covered calls questions

[tcksee]

Hello Tony

when you write a put you receive a premium but if the stock falls below the excise price you
are bound to take the stock on;many times the price will come back but in the case of marconi and telewest they just finished penny shares the marconi you see now is a revamped version the old company; shareholders received 2 newshares and 17 warrants for every 1000 shares they held,
I know you could have sold after the first big drop but you always hope it will come back
a vert expnsive lesson
best wishes
tom

 

[TheBramble]

tcksee - I was asking what you meant in your comment "writing puts can be very expensive the pros dont do them so that makes you wonder".

The pros DO use them. You never have to 'take the stock on'. You either hedge or set up something a little more exotic than a simple write.

 

[JumpOff]

Anley pointed out on another post that when an outside event happens that cause a really big spike it's more likely to make a stock fall precipitously than make it jump up by the same amount.

Some commodities may go the other way (gold or silver comes to mind). But stocks and indexes seem to give you time to adjust or hedge when they are rising; this is not always true when they dive and everyone wants out. The color "black " comes to mind when I think of an adjective....

The pros do sell puts, and I am sure they hedge their risk when do so.
JO

 

[JumpOff]

Gee wiz, today my grammar is no better than my trading! JO

 

[tcksee]

The Bramble Hello and thanks for you comment hedging always cost money but we are always ready to learn. The comment regarding THE PROS I read in a book by Alexander Davidson title How To Win As A
Stockmarket Speculator P 226
Thanks
Tom