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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Kevin who wrote (961)3/14/1997 4:56:00 PM
From: Kevin   of 14162
 
All,

Please help me to understand this:

These are current ASND quote:

.QQAFJ C JUN 97 50.000 9 1/2 -2 1/2 11 3/8 9 1/2 20 37 .QQAFK C JUN 97
55.000 7 1/4 -1 1/2 7 1/2 7 1/4 16 503 .QQAFL C JUN 97 60.000 5 1/8 -1 5/8 6
1/2 5 1/8 36 2,482 .QQAFM C JUN 97 65.000 3 3/4 -1 1/8 4 1/8 3 3/4 9 3,133
.QQAFN C JUN 97 70.000 3 -3/8 3 3 2 856 .QQAFO C JUN 97 75.000 2 0 2 1/4
2 18 858 .QQAFP C JUN 97 80.000 1 3/4 +5/16 1 3/4 1 3/4 5 4,935 .QQAFQ C
JUN 97 85.000 1 0 0 0 0 1,065 .QQAFR C JUN 97 90.000 1/2 0 0 0 0 630
.QQARJ P JUN 97 50.000 4 1/2 0 0 0 0 78 .QQARK P JUN 97 55.000 7 1/2 +1
1/8 8 6 5/8 18 390 .QQARL P JUN 97 60.000 9 7/8 +1 9 7/8 9 7/8 2 879

Now I bought 300shs of ASND @53 1/2 which is the current price. At the same time
I write Junu 55 CC (which is 7 1/4) and buy June 50 put (@4 1/2). These are cases:

if price < 50.00 (e.g. 40.00): I will get:

My Stock/sh: -(53 1/2 - 40) = -13 1/2

CC option: + 7 1/4

Put Option: (50 - 40) + premiums > 10.00

Total Gain/sh: -13 1/2 + 7 1/4 + 10.00 = 3 3/4 (per sh)

if price >= 50.00 but <= 55.00 (e.g. 54.00): I will get:

My Stock/sh: 54 - 53 1/2 = 1/2

CC option: + 7 1/4 (expire worthless)

Put Option: - 4 1/2

Total Gain/sh: 1/2 + 7 1/4 -4 1/2 = 3 1/4 (per sh)

if price > 55.00 (e.g. 60.00): I will get:

My Stock/sh: 55 - 53 1/2 = 1 1/2 (shares being called)

CC option: + 7 1/4

Put Option: - 4 1/2

Total Gain/sh: 1 1/2 + 7 1/4 -4 1/2 = 4 1/4 (per sh)

So it is WIN WIN.

Am I missing anything?

Thanks.

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