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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: fmikehugo who wrote (3973)	10/14/2002 9:05:36 PM
From: LemurHouse	Read Replies (2) of 5205

<<<It's simply a question of finding the right metric to use in determining a stock's potential for high premiums on covered calls.>>> While such tools exist, I think the problem with them is that they tend to distract one's attention from the more fundamental question of whether or not it is wise to be long (or short) the underlying in the first place. The downside potential of the underlying will be significantly greater than the potential CC return, so IMO the main consideration is that you have to be in the right stock(s) to begin with. That is, if you are going to be long the stock, you'd better have a better reason than simply generating CC premiums. Reliance on metrics or screens which identify seemingly rich premium opportunities make it easy to take one's eye off the ball IMO. I think that dUF's observations re the primacy of the (stock) investment decision is good advice. Stock decision first, options decision second. I find that once you've made the stock decisions you don't need a screen anyway, nor any metric beyond Blk-Schls. Just IMO. As a more general observation FWIW, this doesn't seem to be a particularly good time to be writing calls.

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