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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: rocklobster who wrote (534)5/12/2001 12:45:46 AM
From: Mike Buckley  Read Replies (1) of 5205
 
rok,

I want to buy the stock and immediately write ATM or slightly OTM calls for an 8% premium each month. 8% compounded for 12 months is 250% annualized return.

First: It's a 150% return, not 250%. If you invest $100 and earn 8% monthly on the principal and all of the earnings, it will be worth about $250 at the end of the year.

Second: Not having written covered calls, I'm not sure of the mechanics. From what I've read here, I don't think you would be able to use all of your capital effeciently enough to be able to compound all of the earnings all of the time uisng a buy/write strategy even if the underlying stock always went in the right direction.

--Mike Buckley
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