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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: FaultLine who started this subject6/22/2001 11:47:27 AM
From: hivemind  Read Replies (1) of 5205
 
Just put on JUL 45's covered calls on my QQQ's position which I had acquired as a result of short put exercise from JUN. The position is now B/E on the downside at $42.70, and profit max is of course upside capped at 45. My profit percent possible is 45/42.70 = ~5.4% over the jun/jul period (combined short-put/CC periods), or annualized at 32.4%, which is excellent. The downside risk is, as always without a hedge, QQQ=$0.

These short-term writes, whether CC, buy-write or secured short put, have taught me:

You can get higher annualized returns, but the volatility risk is greater vs. longer term positions because of the smaller absolute premium received. Note how I might have actually gotten a better period return had I put on the position for two months to begin with, along with greater downside protection.

The CC was a repair action for written puts that were assigned below breakeven. I merely waited for the QQQ's to reach my breakeven point and wrote the CC's. But it might have been better to simply go longer-term in the first place.

Note also that I am short puts on MRK, which got wacked today on a shortfall. MRK represents a small part of a disciplined put selling strategy for income and quality share acquisition, using longer-term put expirations. I like to keep things diverse industry wise so I don't have them all hit at once.

just some thoughts
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