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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: FaultLine who wrote (93)4/21/2001 10:33:02 AM
From: JGoren  Read Replies (2) of 5205
 
I really don't understand your strategy of selling deep in the money calls. I guess I am a simpleton and look at things from a LTBH perspective. I simply try to sell OTM CC's for extra income to pay down my margin debt and keep my qcom, which has a very low basis. It seems to me that when you sell deep in the money calls, the option transactions take over your investment strategy rather than focusing on the underlying stock.

Yesterday, I bought back the qcom Apr 60's (darn Greenspan) at 2.95 when NASDAQ hit its daily low (qcom spiked down in a 30-minute spiked dip to hit its low at 14:48, so I missed qcom's daily low by a little more than a buck) and a huge loss and sold July 80's for 4.20. Although I missed the daily low, I still did better than waiting until the last hour. Looking for a retrenchment in the market in the next 2 or 3 weeks to exit the July's. I didn't think May's gave enough time; plus, I wanted to have a positive cash flow. I don't like having options out that long a time, so I will exit at the first opportunity that looks good.

I need to figure out how to calculate valuation on calls, so I can convert a call price I would like to buy back at to a stock price and determine if that is realistic. Anyone know how to do that? Taking the example, I sold july 80's at 4.20. What stock price would it take for me to be able to buy them back at 2.20 two weeks from now, a month from now, etc. Anyone know how to calculate that? Or create a table for time, stock price and option price?
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