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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Mark who wrote (1755)4/18/1997 10:34:00 AM
From: Herm   of 14162
 
Hi Mark,

The economy and all of the industry groups are changing all the time. Industry groups will fall out of favor when the climate changes. For example, if interest rates are going up it will impact some groups negatively and other industry groups will benefit. That's a real simple summary. In the real world it is much more complex.

With the fear of higher interest rates, the technology sector has been hit recently. The result is falling stock prices as the fund managers lock in their profits and dump their stock. The small investors run like cockaroaches because of fear of getting stuck with a loss. They don't write covered calls like you and I. Their only hope is the stock price going up!

As an astute investor you can make some real quick profits by being a buyer of PUTS on those high flying stocks that are falling in price like a rock. Reason? PUTS become more valueble as the price of the stock drops. Where do you get the money? Simple, your covered call buyer's premies for starters.

So, if we are writing covered calls for extra income we must be aware of the changing "climate" for our stock selection(s). Retail stocks seem to be going up in price in general right now! ROST is a good stock to be in for the moment. There must be others!

I'm looking for another two sectors that are coming around. Reason? I am in the process of switching out of a few positions (industry groups) in my portfolio in order to increase my profit potential and lower my risk. I hate to spend too much time in stock repairs mode.
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