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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Uncle Frank who wrote (21)	4/19/2001 3:59:35 AM
From: Lance Bredvold	Read Replies (2) of 5205

Over the last few years I have sold a few calls, usually when a price seemed unrealistically and suddenly too high. Sometimes these calls were exercised and sometimes not, but they were in my own accounts where I took responsibility for whatever happened. This month, however, I have some Eaton calls due to expire, and like so many of yours, have suddenly become in the money. I really don't want them exercised, and yet I have little experience with waiting till the last two days to do something about them in my Waterhouse account. And in this case I have to assign part of the taxes from a sale to another person. Question: On at least one occasion I had calls exercised several weeks before expiration. How common is that? Can I pretty well count on these being repurchasable through Friday's close? Is there any market after the close? I hesitate to place a market order on any calls as the spread even looks wide. Yet these particular calls are rarely traded. Should I bite the bullet and hope for the best with a market offer? Back when we used full service (cost) brokers, we'd do these rollovers by calling up the broker and telling him to work it out. Quite possibly I can do this with Waterhouse as well, but doesn't that leave me too much at his mercy? I might well be happy to trade my April 70 calls for July 75's at about the same price. Does a broker take responsibility for getting the whole thing done or could I get another batch sold and fail to get the first batch repurchased, thus compounding my difficulty? What I've actually done at this point is enter a "purchase to close" order at a price significantly below the current bid and ask hoping that at least that fills. But when should I panic if it doesn't get filled? While panicky, what action should be taken? Like bring my bid closer to the current offer? I don't think any of these calls have traded for a week or two. Pretty simple questions which I'm sure most of you who are more experienced have worked through. TIA. Lance

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