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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Lonnie who wrote (3143)12/17/2001 5:56:10 PM
From: Victoria Walley   of 5205
 
CBOE has a weekly newsletter and discusses a new strategy each week. Let me see if this link works:

cboe.com

Lots of different ideas there!

There is no right or wrong answer, but if I think a stock has gone up too far too fast and looks like it is running out of steam, I would likely sell the ATM or first ITM strike, maybe 1-3 months out. You will have the option quickest to lose value if you are correct and the stock pulls back. There is not a lot of downside protection to doing this. Plus, you must either be prepared to part with the stock at expiration or quickly repair or exit if you guess wrong and the stock doesn't pull back.

I have DELL Dec 27.50 CCs on the line right now, I never repaired when they became ITM (they were slightly OTM when I sold) a few weeks ago but so far that patience has paid off. I'll be happy to let the shares go but I could get lucky on this one. Time decay will work to my advantage until Friday and that's the side of the equation I like to be on. Recent volatility has kept the premiums plump as well.

Another strategy would be to sell a way the heck OTM call 6-9+ months out. I often do this on my more boring CC plays, especially those that pay dividends. There is very little downside protection, just a little added income. But you don't have to watch every day and fret, either.

Want to protect your profit? Buy puts. Think of it as insurance.

There are a few ideas...
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