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: Herm who wrote (1522)	3/31/1997 10:34:00 PM
From: Herm	of 14162

HOW TO WRITE COVERED CALLS - A REAL CASE STUDY! ================================================================== Date: Thursday, March 27, 1997 DUCK FOR COVER - ROST IS STILL FLOATING AFTER TODAY! The stock: ROSS STORES (ROST) Last traded at $25 3/8 down another -5/8 on a exceptionally light trading of 255,700 shares. No one likes to see stocks go down. But, we all know that is part of the stock market game. Unless you have all day to watch your stocks and "work the market," cover call writing is pretty good balance between profits and safety. On the positive side, it sure helps my stomach on market days (like Thursday and today) to know that I'm only giving back my call writer's premiums which is my downside insurance money. It's the fat in my account. The principal is still intact. It takes alot of price decreases to start getting into my net cost basis. And, when it really seems bad that's when I become more agressive because I know the storm is about to clear and it will be back to business as usual. This does not appear to be a major correction and may be short lived after this week. Things are pretty good for the majority of people. ROST was off on nothing volume. That is an excellent sign that this baby will bounce back once the bears start cashing in all those PUTS! I'm still a holder of the April 22 1/2 calls which I'm in the hole for $400 as of today. So, I gave back almost half of what I collected this month in premiums for ROST. Things can change on the dime in this game! And as long as I'm breathing I playing the game to the end. On the negative side, if the interest rates don't start to pull back in two weeks, we are heading for more downside volatility. If you are able to cover your covered calls and retain 80% percent of your premium, you should do so and wait for the price to bounce back before you write your next covered calls. This could be a ROST double dipper month! That's when you are able to make more money by covering and writing another call and having that money in your account to work with and/or spend. That's It! Wishing all of you, the BEST OF GOOD BUYS! ********************************************************************************* DISCLAIMER: The writer is presenting a real stock and a live ongoing case study. No recommendations or endorsement to actually buy this stock are suggested nor implied. Trading stocks and buying calls should not be attempted without first understanding the risk/rewards of this type of investment! The writer assumes no responsibility for the opinions being expressed! Buyers always be aware! *********************************************************************************

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