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Non-Tech : The Critical Investing Workshop

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To: pinhi who wrote (29371)	8/17/2000 8:53:45 PM
From: Sully-	Read Replies (2) of 35685

Ok you two (pinhi & clappy). I'm going to try to confuse you both further. Hopefully Voltaire will come along & straighten this out.... <<But what happened during the long drawn out fall of the naz between March and May. It seems that if you tried to write calls your vehicle would get smaller and smaller. Then when you needed the money, bang, the market heads upward and you are forced to either buy back your cc's or roll them out further. Which still doesn't give you your monthly income. It seems that you have to have a ton of cash to sit on while all this happens.>> As the vehicle falls in price, you uncover the original CC's when most of the intrinsic value is gone. Then you cover again at the money. This is starting to provide you downside protection if you are living off of the original call premium. As it falls in your scenario, you uncover when intrinsic value is gone & recover. Repeat as necessary - this could happen more than once a month - QCOM from $100 to the $50's is a great example. Now, since you will eventually cover & the vehicle will also recover, if only temporarily. What you need to do is roll up & out to save the underlying vehicle. You are taking a ST loss on the last CC's written, but you have re-written at a higher strike, further out, generating additional downside protection on the still 'in the red' cost basis of your vehicle. Repeat writing CC's or roll out & up as necessary. Eventually your should have reduced your cost basis on your vehicle & generated income to boot. This ain't a perfect world & making this successful requires determination to stick to the plan & monitor your vehicle more closely than when your vehicle is trending up on your buy/write. Hope this makes sense. tim

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