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

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To: David Wright who wrote (11257)	7/20/1999 1:35:00 PM
From: tuck	Read Replies (1) of 14162

David, Regarding most of our sidewhow put plays being losers -- a different result than Herm apparently gets -- it may be because of our penchant for only going one month out. This means that although the put gains intrinsic value, the time premium disappears almost as fast in puts a month away from expiration. Herm, who goes further out, may have less problem with this effect. Still, this doesn't explain the huge divergence between the theoretical and actual movement of the put prices. The greeks are supposed to take the above stuff into account: delta is derived from the Black-Scholes model, in which t (time remaining till expiration) is definitely a factor. In hindsight, I think I should have bought a couple of August 15s or a couple Sept. 12.5s, instead of three August 12.5s. Except those series have even less volume and OI. At least the calls I wrote are losing value in accordance with theory! Cheers, Tuck

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