> Can you explain this concept in a bit
> more detail? It sounds something like
> selling naked puts, which even the MF
> recommends in many cases.
Here is the way a covered call usually works:
You buy HOTT for $21. It has a run and is now selling for $23. But, you can sell the right to buy the stock at $25 (good for three months) for $1.50. That would be a covered call. It's a Call because someone gets the right to buy a stock, and it's covered because it's your stock that that's going to be bought.
The buyer of the covered call makes out if the stock goes to a price higher than 26.50 before three months is over. The seller of the stock gets 1.50 a share, plus $2 a share if the call is exercised. The only "dangers" are if the stock falls in price (same danger as staying long only you get a 1.50 bonus) or if the stock skyrockets (and you get paid twice).
On the other hand, the buyer of the call (90% of the time) sees his option expire worthless (the stock doesn't get to 25 in three months). So all the risk is on the buyer's side. The seller makes a tidy profit no matter what (unles the underlining stock crashes).
So, covered calls, safe & dependable, kind of a hedge because you're betting against your stock skyrocketing. Covered calls can also be sold at the lowest level of proficiency (according to e*trade) because you can't screw yourself up too badly.
Mr. O! Hadn't seen your moniker in so long I feared you'd gone to that great recycle bin in the sky! My, not a very optimistic thought. I hope all is well with you.
Larry and Craig are toying around. Their legacy is secure. Spunkie's, too, for that matter.
For as well as my DKS has performed, I would have been ahead by holding onto my entire HOTT position, but the race ain't over. I'm "patiently" waiting for the inevitable pull-back to increase my long position, in HOTT. I marvel at this business and management team.
I got in at $6.41, split-adjusted, USD. I still shop at HOTT all the time (I'm 23), and the staff love working there, which is something you don't see at ANF, the GAP, etc.
I agree about the valuation. While HOTT is no longer a bargain like it was a few years ago, it should still outperform the market over the next several years. That's all I ever shoot for.
If you fine folk like HOTT, you'd probably be interested in URBN (Urban Outfitters) as well - another great retailer, fairly valued but growing quickly, still very hip with my g-g-g-g-generation.
$6.41 post or pre-split?
My entry point is $10.67 post-split. Not bad but my performance is not as good as it looks when translated in CDN dollars. Well, who am I to complain?
HOTT is a great stock. Right now I agree that it's getting more and more in the "priced for perfection" category, but there are stocks which have been trading in this category for years (SBUX and the likes).
Can you explain this concept in a bit more detail? It sounds something like selling naked puts, which even the MF recommends in many cases. My e-mail is firstname.lastname@example.org.
Congratulations to all the longs - I got in on HOTT at 6.41 and have held ever since!
Thought the two of you were holding your own and didn't need me. Have sold the 27.50 calls expiring Friday. Looks like I may lose the stock - big deal - I buy back (usually lower) and do it again over and over and over. I love this stock (and selling covered calls)!