FROM THE EMAIL SECTION
Here is a good question from Bill that others should read.
-----Original Message-----
From: Bill
To: Herm
Date: Monday, August 23, 1999 9:42 PM
Subject: write call ITM or OTM ???
Herm ...............Your column in the August newsletter
was GREAT ! . it answered all my questions concerning the
"sideshows".
There was another article in this month's newsletter that
opened up a "can of worms" , and I must get this straight
in my mind.......in the 4th article "MAKE THE CALL BUYER ,
the author indicated that an OTM call was the correct
candidate for the CC, ...in your WINS presentation you
indicate that we use the at-the-money or the deep in-the-
money call as the proper CC candidate. I have read in the
THE CONSERVATIVE INVESTOR'S GUIDE TO TRADING OPTION'S , by
LeRoy Gross to use OTM call as the proper candidate for the
CC... Obivously , there are reasons why you have chosen to
the ITM call and you have profited with it.............Why
do you use the ITM as opposed to the OTM call , and will
there be a situation using the WINS method that I should
consider using the OTM for CC ? I would appreciate a
reply...... I know you are busy.....
===========================================================
Well Bill,
I glad you pointed that out because every single book I
have read on the subject appears to think that CCing only
mean buying OTM and playing a cat and mouse with the stock
price. That is, if you are not called out you get to keep
the entire CC. They teach nothing about being able to gauge
the range of movements and possible pivot points.
Therefore, CCing the books would have you believe that
CCing is a black jack game and not profitable and a
guessing game rather than a skillfull "art" to be developed.
Ask yourself! If you only sell OTM CCs, what happens when
your stock price continues to go down, down, down for
extended periods of time. When is the right time other than
right after options expiration days as the books have you
to believe? They don't tell you when, why, and how to CC
Bill! They just read the book before them and rewrite old
tired false facts which are outdated today. Do me a
favor and check in those books when they claim to sell the
OTM CCs. In other words, do they tell you exactly like the
WINs approach does? I would be very surprise if they do!
They leave that up to you. Well, you might as well not have
read the book in the first place if that is all they write
about! :-) Timing is EVERYTHING in CCing.
I sell CCs at or in the money on pivot reversal points. The
odds are far in my favor. Thus, I grab as much CC premies to
use in my portfolio and hedge my position. That is very
conservative and defensive.
I tried it their way and lost money! Lurkers tell me the
same thing. I never get email telling me WINs caused them to
lose money. That is strange no? Don't believe everything
you read in book because it is subjective. They put a new
cover and new title with the same old ideas. They are brain
dead authors trying to sell books.
Just my opinion! :-) Thanks for your question...... |
