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

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To: Greg Higgins who wrote (11332)	9/24/1999 11:15:00 AM
From: Greg Higgins	Read Replies (1) of 14162

I wrote: If you are confident CPQ would turn up by Jan, there are 3 ways to play it: 1) Buy the stock, 2) Buy the Calls 3) Sell deep in the money puts. .... I think a credible case can be made in this instance for solely selling the DITM puts for someone who is convinced they want to buy the stock. Well, I wasn't convinced that CPQ would turn up by January, but just for the heck of it, I sold one Jan 45 Put for 21 1/2 netting about 21 1/8 after commissions. I got assigned this AM. True to form, I have placed GTC orders to sell 1 Jan 22.5 Put @ 2 3/8 and one Jan 22.5 Call at 3 1/2. Assuming I get filled at these prices, come January one of three things will happen: 1) after expiration, I'll be long 200 shares with a nut of roughly 20 9/16, 2) after expiration, I'll be flat with a $373 profit on a $24 stock (the 100MA is just about $24) after 5 months, or 3) just before expiration, it'll be so close to 22 1/2 that I'll buy back the put and call and sell them both again 3 months or so out.

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