How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: fubsy cooter who wrote (10382)	4/16/1999 11:37:00 AM
From: Herm	of 14162

I had a slight error in my math. That's what I get for trying to rush out the door and answer a post. Sorry! Jonathan couldn't figure out my new math! Thanks :-) My brain came out with a clear $5/$12=42% if called and 17% if not called out! You paid $12. Add that $12 to the $15 strike and you get $27 that you have to clear for a clean profit. You sold the CCs and you now bring in 2 in premies as income. You then get called out and pickup past your B.E. of $27.00 another $3.00 since the CC strike is $30. You take in $2 in CC premie and collect another $3 in the difference between your B.E. of $27 which includes your original 12 downstroke the the called out strike of $30. Calculated two ways if called out: $30 CC strike $30 CC strike Obligations $15 LEAP Strike $15 LEAP Strike ----------------------- ----------------------- $15 difference $15 difference $10 LEAP cost - $12 original LEAP cost --------------------------- --------------------------- $ 5 profit (42%) $ 3 profit of stock profit $ 2 CC income profit ---------------------------------------- $ 5 profit (42%) Only $2 (17%) profit if not called out in this case!

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