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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: BDR who wrote (771)	5/24/2001 3:28:26 AM
From: JohnM	Read Replies (2) of 5205

How so? Called at 10 plus even with only the 4.20 premium gives you 14.20 and it cost you 14.03. Hmm, let me give you the full calculation. I simply copied McMillan (and may well have fouled that up). I bought two contracts for a total of $2806; commission was $15; that equals $2821 in cost. The premium for the 10s would have been $840, subtracted from the $2821, leaves out of pocket costs of $1966. Then commissions for writing the options were $20. That leaves a net investment of $1986. If the option is exercised that produces $2000, less the $15 commission for $1985. I see a loss of $1!! Ouch, looks like neither one of us was correct. I simply did a quick reading of the numbers and found they looked negative and thus fired off a much too hasty post. Clearly, at least with these numbers, it's a wash. Have I done something wrong? John

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