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

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To: Amit Raj who wrote (11417)	8/24/1999 5:28:00 PM
From: Herm	Read Replies (1) of 14162

MCOM Considering the MCOM is not expected to make a profit this year, this is a speculative stock! With that said, and the fact of the recent 52-week high of $56.50 and pull back to the lower BB at $20 and now the come back. Rarely, do healthy stocks ever hit the 52-week high one the first attempt. MCOM has to overcome the temptation at the overhead resistance level of $36. Those individuals will be ready to dump at point. So, downward protection would be on my mind for sure. It is still early for the PUTs at this point. But, do get ready. The next earnings release is not until approx. OCT 15, 1999. Another downward cycle would not be out of the question for MCOM. NASDAQ: (MCOM : $26 5/16) $361 million Market Cap at August 24, 1999 Loss Expected for 1999; Electronic Components & Parts SubIndustry priced at 29.5X PE Electronic Components & Parts SubIndustry up .68% / Electronics Industry up .82% Today iqc.com Cheap PUTs means at least two or three strike prices down from the current selling price. So, the 17 1/2s OCT. PUTs @ 7/8s is about right. You picked up over $8 on the CCs. You have a pocket full of change. I would be more inclined to wait for MCOM to peter out at the $30+ and go for either the 25 OCT. @ less than 4 1/8s or the 30 SEPT. @ less than 5 1/2s. Reason? I willing to bet MCOM will not hit a new high on this cycle. OBV is pretty much topped out. Stocastics is reaching a crossover point. That's an early warning sign. The upper and lower BBs are starting to close in on MCOM. You can see a narrowing of the BBs is possible soon. Summary, earnings release - buy real cheap PUTs two or three strikes down. Want to capture downside cycle? Spend more for the PUTs like ATM or ITM for a sure thing. You should be able to squeeze 3/4 to 1 1/2 with ITM PUTs and a pull back. Add that to your CCs and you are doing very well.

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