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

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: NateC who wrote (11362)	8/9/1999 2:10:00 AM
From: KevinD	Read Replies (3) of 14162

The way I understand Macmillan is that what went on before should not be relevant in the current decision. So, the idea is that you are calculating ROI from now, the time you make the decision and sell the call, not from the time you bought the stock in the past. Whether you already own the stock or not, the ROI you are calculating is as if you were doing a Buy-Write today. If you are doing a Buy-Write today, your "I" is the net of the cost minus the premium. At any point in time, your "I" is your net investment which is cost minus premiums received plus premiums paid. Your possible future "R" is the appreciation (hopefully) up to the strike price of your current write position. After you close out a play completely I guess you can calculate your ROI any way you want. But when you are trying to make a decision today, the net investment approach seems much easier to use. What is my net investment as of today if I make this move and what are my possible future returns at the various strike prices at expiration? The premiums are not part of the future return because you pay or receive them today, not upon expiration.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next