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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: surfbaron who wrote (4)	4/19/2001 10:23:49 AM
From: JGoren	Read Replies (4) of 5205

I own a significant position in qcom and have been writing CC's on every share I own since December. I try not to get greedy. As a result, I have haven't earned as much as I might have. With the market falling in March and April, selling calls close to the money at around $3 was profitable for those who can stand the risk. However, I sell well OTM. I prefer to sleep at night, since I am selling both in a tax-free and taxable account. I need to avoid being called because the capital gains would kill me. I haven't played it more aggressive in the tax-free account for a simple reason: It's easier for me to have one strike price per stock. I usually write about 15 above the stock price. Today and tomorrow will be a bit of anxiety since I have Apr 60's outstanding, but as we all know, the stock price tends to decline in the last day or two before options expiration. For April I sold 75's and then bought them back about 10 days ago for a teenie and then two days later sold 60's. My strategy is to hope the stock price goes up but jnot above the strike by expiration date. For those of us with margin debt, the last few months have been a great way to lower our debt. Going forward, it's hard to tell what's gonna happen. Those of us who own Qcom know how volatile it can be; therefore, I shall still sell way out of the money, especially because China contracts are expected to be announced in May and I don't want my stock called. I would have to expect Qcom to rise over the next few months. But, having held mine for years, I also appreciate the fact that the PE ratio has come down to earth. The best time to write calls is in a relatively stable price situation where you don't expect a big increase. Hope that helps a little.

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