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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: William who wrote (968)6/11/2001 6:50:58 AM
From: Sig  Read Replies (1) of 5205
 
William:
Could I ask you a few questions based on your experience.- I'm pretty new to CC's
Generally I try LTBH and so profit on CC's means I have failed but the calls would be a way to handle
temporary downturns.
I wrote three leaps on Stor shares for around $6.50 each and those shares cost me $17.
The result is that I will have a profit of ~40% if I get called anytime in the next two years. The calls are presently at $4.50
As I understand it, I can lose only if the shares close below $10.50
The downside is I will have to keep the shares in my account to cover in case of getting called and they probably will not be marginable.
1. This is too good to be true. What am I missing on downside possibilities. ?
Why don't I just buy another 300 shares and write covered leaps when it goes back up a few $$?
2. Would you buy the calls back at the present (30%) profit for a week and write them again when the stock goes back up.?
A person who trades calls would probably do that for better gains, but I am mostly trying to put a bottom on possible losses. For example, if I bgt the calls back and the stock dropped from $18 to $12, I would lose- onpaper,
50% of my investment.
I also hesitate to buy calls back because in the past, it was a waste of money when I three times wrote CC"s on Qcom and bought them back when they would have gone to zero anyway. In retrospect, it would have been much better to buy puts on a stock that may just continue on down.
Thks in advance for any comments you can make.
Sig

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