As I stated, I would not do this with CYMI now.
However, for volatile stocks, covered call writing, with some technical analysis, is very effective.
By the way, a covered call writer doesn't face all of the downside risk of the "longs". Your response allows only a single write. IF the market is retreating (say to 34), you can buy back the Nov 40, for say, 1, and sell the 35 for 3 (maybe more if implied volatility rises), reducing your basis further. In my example, to 32 9/16. I don't usually do this, but it is a method of recovery, if you believe the drop will be limit in size and for an extended time.
Ira |
