I have been studying and paper trading for about the last 3 weeks now. I thought it might be interesting to post what happened on the 6 stocks that I just picked. Their was no fundamental analysis or technical analysis involved the selection was more like throwing darts. The stocks were all large cap Dow 30 stocks. All stocks were paper traded on options expiring in June and all were covered calls which either expired or were covered on Wednesday before expiration.
Mkt Change, Underlying Change, Covered Calls,Covered Calls on Margin
1. -3.60%, -6.16%, -3.76%, -1.36%
2. -1.12%, -1.81%, +0.14%, +2.09%
3. -3.60%, -2.28%, +0.77%, +3.81%
4. -2.31%, -3.59%, -2.10%, +0.69%
5. -3.60%, -5.13%, -1.38%, +2.37%
6. -1.12%, -1.91%, -0.95%, +0.00%
I realize that this is not typical because of changing market
conditions. But it was interesting in the fact that it told me several things about covered calls.
1. Fundamentals & selection of the underlying are very important.
2. Writing covered calls definently improves your position.
3. Using margin to purchase the underlying appears to be the best
way to go. It improves the return of the covered position but
doesn't have any affect on the return % of the underlying by
itself!
4. I still need to paper trade for a longer period of time to get
more comfortable and have a better understanding of what happens.
Any and all comments are welcome on this. Dennis |
