Udinese, the "Covered Call" Stock Option Trading of Football

Years ago, one of my friends began stock options trading using a technique called "Covered Calls". We would go sailing and he would sit reading "Investor's Business Daily" for hours while the others on the boat would be doing all the work. He was enthused at the early financial rewards and tried to convince everyone that this type of options trading would make us all millionaires if we took it up. Basically the technique allowed you to buy "options" to buy stock at a future date. The option, of course cost a fraction of the cost of the stock, so you could control hundreds of thousands of dollars of stock for a few thousand dollars. The key was, you had to sell the option at the time the option was to expire or buy the stock. What would happen is that the good stocks that would rise in price would give him a very good profit as there would many buyers for the options because the good stocks would have risen to a price higher than the actual price set by the option price weeks or months prior.

What actually happened in the long run is that to avoid losses, he would buy some the bad stocks hoping they would eventually come good to avoid the small loss of having to sell the option at a lower price than what he had paid for it because the potential buyers of the option would pay for the option at the price of the stock at the day of expiration of the option, which had gone down.

Eventually, he was left with all the bad stocks that had gone down in price, though he also sold some of the options at a loss. He lost money and was left holding a bunch of stock that slowly lost market value.

Udinese is for me the covered call of football. They sold all their good stock (players) and made money but had to keep or sell at a loss the bad stock (players) and in the end they lost overall.