Running Calls on positions is interesting.  Many times the clietns
do not want to sell the stock and you end up rolling up the calls if
they are in the money.  This, of course, takes away the call
premium on the initial contract.  Clients get excited when they
don’t have to sell the stock, and freak out when the stock rises and
they may get called out.  This is counter-intuitive in that you
get mad when the stock pops up and releaved when the market takes the
price down. 



Perhaps a good psyche hedge.

Rightway: You ever actually been excercised out of a highly appreciated position? That was the question I asked of Farm/Boy. What do you do then? Your answer please…Deal or no Deal?

Yes I have.  If you run a covered call strategy from cash, ie buy
a stock, write a call and give it up on the third Friday and walk away
with your apprecitaion, dividend, and call premium it is easy…clients
are OK with that.  It is when you are holding a large concentrated
position that they do not want to sell that the problem comes up. 
Sometimes they are OK with selling it, especially in non taxable
accounts, but generally it is a problem when the option approaches
expiration and it is in the money.  Rolling it up is usually the
answer.

Rightway/Farmboy: Obviously you don’t know the way to avoid excercise and sale of the HIGHLY appreciated position. Simple, you move the excercise to a “short acct.” thereby creating a short against the box. At that point, you have until the cows come home to decide what to do. Just was waiting to see if you could come up with the answer instead of preaching to me about my client relationships.

Don’t pick a fight sport, you will loose.

I don’t come here to fight. Do you like to fight when you can’t defend yourself on knowledge and experience?

[quote=Revealer]I don't come here to fight. Do you like to fight when you can't defend yourself on knowledge and experience?[/quote]

That's a laugh.

[quote=Revealer]Rightway/Farmboy: Obviously you don't know the way to avoid excercise and sale of the HIGHLY appreciated position. Simple, you move the excercise to a "short acct." thereby creating a short against the box. At that point, you have until the cows come home to decide what to do. Just was waiting to see if you could come up with the answer instead of preaching to me about my client relationships.[/quote]

This a smoke and mirrors position. It only delays the inevitable and if there are dividends they are gone. If the stocks runs your in the same boat as I and other indicated.

Your insecure demeanor revealer is, in your case, justified.

Talk about the original question(s) rather than making personal attacks. Farm/Boy,dividends on a short against the box offset each other. Go find someone else to back up your scenarios. All your attacks are making me insecure. (BTW the position is working out just great, thank you.)

Here’s a start for the “buy and hold” crowd. (Does Liquidate and Transfer still count for “buy and hold”) Anyway, here’s the scenario…Had a retired exec from one of the recently strong HEAVY company stocks call me and was nervous about protecting his profits on mutiple thousands of shares of his highly appreciated stock (cost basis about 8% of current price). I suggested a costless collar…sold out of the $ calls to provide capital to purchase out of the $ puts. Put on the position and he was extemely relieved. Now, let’s just imagine the conversation if @ jones: “Well, Mr. Bigbucks we don’t believe in such folderol as option “stuff”, but let me show you this terrific mountain chart on ICA.” Suppose that’d work?

Farmboy: What do you suppose the term COSTLESS collar means? Did you read the part about huge cap gain? Did you read the part about client nervous? My experience with rich people is that they didn’t get that way by being slow to understand things. Now for horror of horrors…what do we do if calls are OMG EXCERCISED?? Your answer please. Deal or no deal? 

Hope it works out, it can even if you're clueless to the points made. It's a zero sum transaction less your and the dealers fee. It sure doesn't seem like you get it at all but enough said.

You can't refute a platitude (buy and hold) with another (derivative trades add value). There is no more logic in your statement and it's kind of amazing you can't get it through your head or that the client is really informed listening to you blather on like this.

How about asking if the client was properly educated/positioned first? A costless collar can be a quite appropriate technique, especially if the client wants to see how the stock does for another year or so. So can a prepaid forward sale, primarily if the client wants to diversy but keep some upside on the initial position. You can also sell a progressively larger number of calls (i.e. on a 100,000 share position, first sell 100 calls just out-of-the-money. If it's above strike just before expiration, sell 200 calls to pay off the first 100, etc etc) to sell out a position at a higher target price (and the client gets paid the premiums if it doesn't go up, and yes you give up downside protection.)

Point is, many techniques can be appropriate. Only outlining the particular strategy without discussing the client's situation is like 2 blind men describing an elephant- the fella at the trunk and the fella at the tail may describe two totally different animals, but they're both right.

FB,RW,OD: If you boys can scrape up 4 beans, buy a Barrons and read page 20 this week’s issue. After reading the article, send attack messages to them.

[quote=Revealer]FB,RW,OD: If you boys can scrape up 4 beans, buy a Barrons and read page 20 this week's issue. After reading the article, send attack messages to them.[/quote]

I didn't attack the collar "as if I know best". I did point out the obvious (what should be obvious here anyway) which seemed to be lost on people who are critical of "buy and hold" and citing a collar as refutation of that investment concept. Hedging is no more an absolute solution than buy and hold. It isn't rocket science in the case of hedging since it involves derivatives and the end result must always be zero, similar to poker with house commissions on every player. Sure the risks changed for the short-term but consider the play over the long-term for all players, no net winners and costs that eat away. Add to that people shouldn't waffle into selling positions through option obligations, this was speculation based on how the post read. If I was wrong I apologize. People who are nervous about a position might be just as correct as the collar in biting the bullet and selling the concentration rather than game it with the collar. I acknowledged the collar could work and I didn't wish to appear as if I was attacking "collars" in general, again I apologize if that what was taken from my post.

You can't refute a platitude with another platitude was my main point.