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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: FaultLine who started this subject	5/2/2001 5:21:14 AM
From: FaultLine	Read Replies (1) of 5205

SOLD QCOM JUN 60 @ 7.70 today at the close on 1/3 of my QCOM position. I recently purchased these shares at 57. Since I am considering these shares to be a trading position, I will allow these shares to be called. The other 2/3 of my position is uncovered at this time. I'll consider my investment price to be the market price of Q at the time of the option sale, that is, $61.70 at the close. Since this is slightly in-the-money (ITM) by 1.70, the time premium is 7.70 - 1.70 = 6.00. Transaction breakeven is at 61.70 - 7.70 = 54.00. The downside protection is a healthy 7.70 / 61.70 = 12.5% (10% is considered adequate). Maximum return is for expiration > 60 and is 60 - 61.70 + 7.70 = 6.00. ROI 6.00 / 61.70 = 9.7% for 7 weeks (but I think there will be a serious dip 'twixt now and then which will possibly allow a buy back). Total commissions (in and out) are 15 + 15 + 35 = $65 This account is taxable (but see my previous post...<g>). --dfl@transactionsbyaprofessionaldumkof,donotattemptthisathome.com

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