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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Seeker of Truth who wrote (393)	5/3/2001 2:05:36 PM
From: BDR	Read Replies (2) of 5205

I am still struggling with the idea that you brought up that returns may end up being the same for calls with high and low premiums because of the difference in volatility. At first I thought that might be the case. But I don't want to confuse volatility with risk. For someone committed to holding for the long term risk is important but volatility is not. Volatility can be a problem for short term traders. But is that a problem for covered call writers writing short term options? I am thinking out loud here and haven't really resolved the matter to my own satisfaction. Clearly volatility provides richer premiums and, if you buy a stock that you are comfortable holding long term if you are not called out, aren't you getting the best of both worlds? If you are called out volatility increases the chances that you can buy back in at or below the price you were forced to sell at. Or is my thinking all wrong? dDR

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