David,
I've only been with this thread a couple of weeks, and I can readily see the value of writing CCs when a stock is making a peak. If you've been following here, you would see it as well.
At it's peak, the CC is going to be worth a high premium (this is money coming into your account. High = good). If, after a few weeks, the stock has fallen, buying back the call you recently wrote is going to be C H E E P! But, you still have the overwhelming majority of the premium in your account. With that you can buy more of this stock near short term lows, or, buy something else that looks more attractive, or, buy calls on this stock for the ride back up.
There are other variations on this, but I hope this will help you get the idea. Not trying to be a smart ass here, as I have to confess, I didn't see this concept at all until I read Herm's work. And I've been writing calls for at least 2 years.
Good luck! Ken |
