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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: James F. Hopkins who wrote (12820)5/28/2000 6:57:00 PM
From: robwin  Read Replies (2) of 14162
 
Jim and Dan, thank you both for your insight and analysis. As a novice in CC writing, it takes awhile for things to sink in..

I have two queries:

1. Jim's effective dividend yield is increased by lowering his price in MO to the $9 area after writing the calls...but is this not only a temporary effect? Once the calls are covered or the stock called, are you not exactly where you started in terms of dollars and yield? Is the advantage that you can use the covered call proceeds to invest in something else during the period before covering or being called? Is it not a "zero sum" game? Excuse the question if the answer is obvious..

2. I am in SUNW as i previously posted and was wondering if this made any sense for the short term...I am in for 400 shares at about 85 and the stock seems to have a short term range of 68 to 80....near 80, I sold 4 October 90 calls for $9.00....as the stock went back south to 70 I was able to buy them back at $6.50 (quick little profit over a few days)...I am now waiting for the price to run up again (hopefully) and write some more calls once the premium increases again...is this playing with fire?

Robert
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