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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: rydad who wrote (2045)8/15/2001 6:15:58 PM
From: Uncle Frank   of 5205
 
>> Please explain to me why you choose to close your position ( I assume that means to buy back your call) .

First let me comment that I don't count the proceeds from a covered call sale as "my money" until the position has been closed, either through buying it back or expiration. Since there is always the possibility that I will want or need to buy the calls back, I think this is a healthy mindset.

I sold calls that had 6 weeks remaining until expiration for a premium of $4.30. That works out to .71/week. I had the opportunity to buy it back today after 2 weeks, and netted $2.15. That works out to $1.08/week rental, which is far more than I had expected. If I had left the position open, the most I could have gained over the remaining 4 week period was an additional $2.15, or $.54/wk., which is less than I'm willing to accept for capping my optimism on qcom.

Now that I have uncovered those shares, I'm free to resell September calls if the stock moves up in its trading range and offers a higher rental fee per week for the remainder of the period till expiry. If that doesn't happen, I could write October calls, or simply leave the shares uncovered. The point is that I don't have any limitations on my actions now that I have unwound the september70 position.

You might consider how much more difficult it would be to unwind a strangle. I'm a great believer in keeping things as simple as possible, as is our put expert, edamo.

uf
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