How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Dan Duchardt who wrote (13719)	6/22/2001 7:20:09 PM
From: Sam2482	Read Replies (3) of 14162

With the volitale market having flat to bearish bias (IMHO)I have be doing in-the-money CC to give me some downside protection. I realize I'm giving up some possible capital gains but I'm gaining downside protection. To me this strategy is not quite as safe as a hedge wrapper but a little easier and more lucerative to do. Look at NEWP. One could buy the stock @ 24 and sell the Jul 22.5 @ 3.70. you would have a 9.16% return in one month if called out. You would also have a 15.4% downside protection cushion. If you do the wrapper say sell the JUL 25 for 2.60 and buy the JUL 20 PUT for 1.50 your total net if you get a buck increase in the stock would be 8.75%. If the stock don't increase your return would be 4.58%. Granted this would give you protection against a meltdown,but if the stock is anywhere between 20.01 and up your are better off selling the ITM call. Keeping or losing the stock is not an issue to me. I use Brown so its 5 bucks in or out. Any comments??

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