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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: TsioKawe who wrote (263)	4/25/2001 8:38:13 PM
From: Uncle Frank	Read Replies (2) of 5205

William painted a pretty grim picture, but I don't think it's that bad. Bought at 7.15 Wrote 7.50 cc's at 1.00 Bought 7.50 cc's at .80 Sold 5.00 cc's at 2.15 The net result of all of this frenetic trading over the period of 1 day is that if your arba gets called at 5, which is highly likely, you will end up with 7.35 in your pocket for every 7.15 you spent. But your broker will be happy, since they'll end up with considerably more than that in commissions. This is not an approach I'd care to emulate. You identified the basic problem in the following comment: >> Fearing what may have been a drop in the markets, I turned around and... You apparently don't believe too much in arba to begin with, and you've let your fear guide you ever since you made the initial buy. I'd suggest you keep records of your transactions and review them on 5/19 after your shares get called away. My guess is that you'll find your initial buy-write transaction would have yielded the best result. btw, I wouldn't worry much about an early execution since there is still time premium in the calls. And I have never seen contracts executed in multiple lots when auto-called by cboe. duf

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