september week 2, page-38

Hi gloveski,

We don't do a lot of uncovered options. NCM was an exception and we have now half covered them.

Most of our option plays are very boring. We hold a dividend paying stock long term with no real intention to sell but if it starts to look like it is topping out we might sell a call. The worst that can happen is that we lose the underlying stock at a good price.

We always look to the underlying TA and FA. If you get the underlying price direction right then you will get the option right. We would roll an option up in the way of your example where the underlying share price had taken an unexpected turn north and didn't look like stopping. We might also cover half the option by buying stock in those circumstances. David's view is that you can go on rolling up forever - but don't bet the house on it because one day there will be an exception to the rule. In fact there was in the '90s with ANZ I seem to recall. We took a large loss and it taught us to be careful.

cheers

Lindfield