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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Uncle Frank who wrote (215)4/30/2001 8:12:59 PM
From: Brian Sullivan  Read Replies (2) of 5205
 
If I had not written calls, the return for the contract period would have been (48-35)/35 = 37.1%
Writing calls, my return was (40-35+10)/35 = 28.5%

Using this method, it is clear that I would have done better by not selling the calls

You made an error in computing your return here:

(48-35)/35 = 13/35 = 37.1%
(40-35+10)/35 = 15/35 = 42.9%

The simple way to look at it is to take the 10 dollars option permium and add it to the strike price, 40+10 is 50
Thus unless the stock exceeds 50 at expiration you come out ahead by writing the covered call.
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