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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Judith Williams who wrote (175)4/24/2001 12:46:04 PM
From: BDR  Read Replies (2) of 5205
 
Judith-

Agreed that for most purposes ballpark returns are sufficient. The difference increases as the premium increases as a percent of the stock price. We are usually talking about long term options or LEAPS in that case. For example, if you sold a LEAP call strike price 20 for $10 on a stock selling at 20, the ballpark return is 50% when the real return is 100%.

In rereading my post to you I want to apologize if I came across as lecturing. I know you are familiar with options. As far as front month vs. longer term option writing, I too usually have been writing front month for many of the same reasons you gave. The "Greenspan Surprise" a few days before option expiration has me rethinking that strategy. My post was not really directed at you but was just me putting my thoughts at the time down as they came to me.

Someone had posted earlier that it was easier to predict short term movements than long term. I actually think it may be the opposite. I haven't a clue where a stock like SEBL will close in one or two weeks but I think I have an idea what the trend is likely to be over a 2 to 5 year timeframe.

Having said that I have just written May 22.5 calls against my JDSU. So much for following my own advice.(g) I expect the market's perception of the company's prospects to improve but that may be 3 to 6 months down the road. Right now I don't have covered calls on anything else. Wish I had done something last week.
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