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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Lance Bredvold who wrote (22)	4/19/2001 10:54:32 AM
From: BDR	of 5205

I use Fidelity and enter most of my covered call writes online. But I do have the option of talking to a broker. I don't know about Waterhouse. If you are trying to roll out a call position you should talk to a live person and see if they will let you enter it as a spread or paired transaction, that is, buy the near term option and short the longer term option for a net transaction cost. If the expiring option is currently quoted ask $5 and the longer term option is bid $5.50 you would ask them to execute the transaction at a net credit of $.50. You don't really care whether they end up executing at 5/5.50 or 5.25/5.75. It is all the same to you. But you have to stay on top of it because if they can't get that spread they won't execute and you could get called away. As long as there is a time premium you should not get exercised but the time premium vanishes as expiration approaches so the risk of exercise increases. Also you mentioned that you hold thinly traded options which will make it very difficult to know what the time premium is. Low volume may make it difficult to do a spread as described above, too.

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