How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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

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To: Zach E. who wrote (8784)	10/8/1998 9:54:00 PM
From: Vol	of 14162

Zach, you're right volatility is currently through the roof. But I checked out this strategy with the Options Toolbox from CBOE and even with a 20-25% volatility you can get better than 4% per month. What I am concerned about is the margin requirement. It is very low for a far out of the money naked call, but when it gets in the money, watch out! Example SPX 1000 Sell 1080 call for 8 margin requirement = (100,00015%)-8000 + 800 = 7800 Min is 10% for broad index, thus margin is 10,000 Margin requirement is recalc'd every day SPX 1150 1080 call = 85 (before expiration) margin requirement = (115,00015%) + 8500 = 25,750 !!! We all know we can roll up and out when a short call moves against us, but the margin requirement can get prohibitive. This makes me feel that I should keep 30% or more or the value of the index laying around in case of a big move upward. That definitely hurts the % monthly return. Vol

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