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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Clean who wrote (7578)6/10/1998 9:13:00 AM
From: Caroline  Read Replies (1) of 14162
 
Example:

DELL is at 85.

Buy a DELL JAN 80 Call for 18 ($1800).
Sell a DELL JUL 90 Call for 4 ($ 400).

Net debit: $1400.

At JUL expiration:
- DELL is at 80:
Keep the $400 credit.
Write a call for the next month out.

At JUL expiration:
- DELL is at 85:
Keep the $400 credit.
Write a call for the next month out.

At JUL expiration:
- DELL is at 90:
Keep the $400 credit.
Sell your $85 stock for $90 (9 point profit at $90).

As just happened to me, though, on an AMZN covered call: DELL goes to 4 billion and you still only get to sell at 90.

That part is the "art."

Regards
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