Biotech Values

[iwfal]

I'm comparing writing a covered call to writing insurance, you are focusing on the incremental addition of a call to a long position.

Suggest that you cannot look at the writing of the call as an incremental thing - because the value of that call is very highly inversely correlated to the value of the stock upon which they are writing it (as a covered call). I.e. the stock has volatility x, the call has volatility >>x - but in aggregate their volatility is substantially less than x.

Amusingly/similarly, almost no one buys insurance without owning the underlying asset. The only exception I can think of is related to all the idiots that bought insurance on MBS that they didn't own (and didn't that turn out well?).