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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: R. Gordon who wrote (6212)	12/21/1997 1:06:00 AM
From: Douglas Webb	Read Replies (1) of 14162

Yeah Richard, I'd love to get 11% per month too. But notice that her 22% was for three months rather than one, and that's only if she gets assigned, which will only happen if VVUS is over $12.50 come expiration in March. It's a fairly conservative bet, and if you can get results like that every quarter you'd double your money each year, but I think this is a special circumstance: VVUS has dropped a lot recently, and has the potential to climb back to where it was. This adds lots of volatility, which makes those long-term options expensive. That's why JoAnn can get 22% on a buy-write with a fairly good company. Most buy-writes with this sort of return are volatile because the company is high-risk. The only real risk in VVUS is whether or not they can ramp up production on their product before some competitor beats them to it, or the government shuts them down for some reason. (I'm actually not too familiar with VVUS; by the time I had money to invest it was already dropping. So I'm not quite sure what the risks are.) Doug.

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