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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Uncle Frank who wrote (346)	4/30/2001 10:20:56 PM
From: BDR	Read Replies (4) of 5205

Frank and thread- Most of my covered calls are written out of the money as I try to reduce the risk of being called away and maximize the return if I am called away. Today I did something a bit different, a true buy/write, in an account where I don't mind being called out but am more concerned about capital preservation. I thought I would post this more conservative trade for discussion purposes. All yields include commissions. Bought 400 SEBL @ 47.18 ..................$18,891.95 Sold 400 SEBL May40 Calls @ 8.80........$3,462.20 Net capital investment.......................$15,429.75 Return if SEBL > 40 in 18 days..................3.58% Annualized return if compounded monthly.....53% 12.86% downside protection. I am trading the low probability of a higher return with an OTM call for a higher probability of a lower return with an ITM call and getting better protection of capital. edit- if you are wondering about the commissions, this was done in a Fidelity account that doesn't qualify for their lowest rates due to infrequent activity.

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