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Politics : Formerly About Applied Materials
AMAT 262.05-0.3%10:53 AM EST
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To: Jerome who wrote (41956)2/8/2001 11:39:23 PM
From: Andreas  Read Replies (3) of 70976
 
I have been employing the exact same strategy for 2 1/2 years and it worked fine until about November. At that point my portfolio dropped so much in value and so quickly that I couldn't write calls with any meaningful premium at a strike price that was at or above my cost basis. So here I sit with a portfolio under water and no ability to write covered calls for only a month without dropping the strike price below my purchase price. I have often thought of writing calls further out (say six months) for an absolute larger premium but obviously a smaller premium on a monthly basis. Had I sold calls in November for July I would have been better off. Of course, at the time I liked the one month 5% call premium hoping I could repeat that performance month after month as I had for over 2 years. I wasn't as excited about receiving 20% for seven months. Unfortunately, all I got was one month. December, January and February turned out to be too small in terms of time premium. I don't know that there is any way to overcome this problem, except to accept the loss and write calls for a strike price below cost. I own LSI which turned into a disaster (bought at about 32.50 after dropping from 90). I thought I was getting in cheap in september until it dropped to 16.50 on December 21. What a nightmare. If you have any insight I'd appreciate your sharing it. Thanks.
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