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+Chapter 2: Covered Call Writing 
+Return if exercised - margin 
+Downside break-even point cash 
+Downside break-even point - margin 
+XYZ 
+7.9% 
+46.3 
+47.6 
+63 
+AAA 
+16.2% 
+44.9 
+46.1 
+Seeing these calculations, the XYZ stockholder may feel that it is not advisable to 
+write against his stock, or he may even be tempted to sell XYZ and buy AAA in order 
+to establish a covered write. Either of these actions could be a mistake. 
+First, he should compute what his returns would be, at current prices, from 
+writing against the XYZ he already owns. Since the stock is already held, no stock buy 
+commissions would be involved. This would reduce the net investment shown below 
+by the stock purchase commissions, or $345, giving a total net investment (cash) of 
+$23,077. In theory, the stockholder does not really make an investment per se; after 
+all, he already owns the stock. However, for the purposes of computing returns, an 
+investment figure is necessary. This reduction in the net investment will increase his 
+profit by the same amount - $345 - thus, bringing the profit up to $1,828. 
+Consequently, the return if exercised (cash) wpuld be 7.9% on XYZ stock already 
+held. On margin, the return would increase to 11.3% after eliminating purchase com­
+missions. This return, assumed to be for a 6-month period, is well in excess of 1 % per 
+TABLE 2-17. 
+Summary of covered writing returns, XYZ and AAA. 
+XYZ AAA 
+Buy 500 shares at 50 $25,000 $25,000 
+Plus stock commissions + 345 + 345 
+Less option premiums received - 2,000 - 3,000 
+Plus option sale commissions + 77 + 91 
+Net investment-cash $23,422 $22,436 
+Sell 500 shares at 50 $25,000 $25,000 
+Less stock sale commissions 345 345 
+Dividend received + 250 0 
+Less net investment - 23,422 - 22,436 
+Net profit $ 1,483 $ 2,219 
+Return if exercised-cash 6.3% 9.9%