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

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To: Herman J. Matos who wrote (698)	3/12/1997 9:17:00 PM
From: RayV	of 14162

Herman, Steve, thread -- In the matter of repairs, here's a question with illustrations from real situations. The broad question is When is it better to close a position at a loss so you can use the funds for better writes elsewhere? For example, I bought SPYG at 12.5 in Jan and sold the feb 12.5 calls for 1.5, producing a cost basis of 11.16. The stock made a steady decline and the calls expired worthless. In march the stock was way down, and I sold the July 10 Calls at 2.25 reducing my cost basis to 9. SPYG closed today at 8 15/16. The July 10 calls are closed today at 1 9/16. Now to cut losses I could buy that back -- putting the cost basis at 10.65. Then sell the stock at probably 9 for a 1.65 loss. The question illustrated by this example is how do you know when to take a loss and move on? I have a similar position in IOM where I have just sold the may 15 calls. I have also bought the apr 20s hoping to do steve's stepped in strangle on the earnings on the 17th or 18th of apr. My cost basis there is 13.97. I'll probably keep making repairs on these two, but I'm wondering about the question in general Thoughts on this? Thanks. Ray

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