Back on 12/31/07 I needed to do something with KO and BDK. I was Long in the stock (I actually owned the stock) and I went ahead and sold a Jan '08 ATM call on both.
When you sell a call on stock that you're Long on, you make money if the stock goes up, stays neutral, or even if it goes down a little. As long as the price of your Long stock doesn't go down so much that its starts to drop below the down side protection you got by selling the call.
So this is where I currently am with KO and BDK (as of 1/08/08):
KO - bought the stock for $62.57 a share.
I sold the Jan '08 60 call for a credit of $2.00.
This makes my new CB, $62.57 - $2.00 = $60.57 (This gave me $2.00 of downside protection).
If the stock price stays above my CB of $60.57, I make money.
So where is the price of KO at the close of 1/08/08? Today it closed at $63.75. I'm makin' money baby!
BDK - bought the stock for $70.55 a share.
I sold the Jan '08 70 for $2.15 a share.
This makes my new CB, $70.55 - $2.15 = $68.40.
If the stock price stays above my CB of $68.40, I make money.
So where is the price of BDK at the close of 1/08/08? Today it closed at $64.98. Not lookin' so good.
I've got 10 days left 'till expiration on both of these.
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