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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: FaultLine who started this subject	4/30/2001 1:03:44 PM
From: FaultLine	Read Replies (2) of 5205

Nice little surge in prices this morning (it gets the eternal optimists up in a lather <g>). I watched as NTAP rose and then leveled at about 23.40. Sold NULEE NTAP MAY 25 at 2.20 about an hour ago. This is a 9.7% premium (all Time Premium) on the stock price. My investment is 23.40 (today's price) for the underlying stock. I am willing to let the stock be called therefore the numbers computed below are assured. At any closing price at or above the strike, the position is worth 25 + 2.20 = 27.20 which is a return of 27.20 - 23.40 = 3.80 for a roi of 3.80 / 23.40 = 16% in three weeks. Ideally, of course, I'd like for the call to expire with NTAP at 24.99 <g>. My break even point is 23.40 - 2.20 = 21.20. Between the break even at 21.20 and the strike price at 25 the return varies linearly from 0.00 to to the 3.80 maximum computed above. If the stock remains unchanged at 23.40 the position simply returns 2.20 for an roi of 2.20 / 23.40 = 9.4% in three weeks which is a Buffet-crushing 163% per year (in my dreams...). --dfl

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