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

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To: Herm who wrote (11248)	7/20/1999 11:13:00 AM
From: tuck	Read Replies (2) of 14162

Herm, Getting puzzled and frustrated here. On Thursday, I recently saw Edify's RSI and stochastics at tops, and it started to drop away from the upper BB. So I wrote Aug 12.5 calls when the stock was at 13 1/2 and bought some sideshow puts as well. The calls went for 2 1/4, the puts cost me 1 3/8. As far as the stock price is concerned, my timing was near perfect, for a change. This morning it is a little below 12. The calls are at 1, which is fine. But the @#&$% puts are now at a bid 1 7/16s! Almost a two point drop in the stock and only 3/16s movement on the puts! The delta was supposed to be -.45. The puts seem to trade 0 to 20 contracts per day(maybe two or three zero volume days per week), and the OI is 171. I'm going to be lucky to break even on this sideshow, because I think Edify is nearing a short term bottom. What gives here? I realize puts lose TP quickly when they get ITM, but this is ludicrous! Only three days have passed and we're weeks from expiration. At this rate, I am never going to do a short sideshow again. Does this stuff happen to you? Or did I buy the wrong puts? Cheers (I guess), Tuck

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