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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Eric Berry who wrote (1334)7/5/2001 1:39:42 PM
From: Dan Duchardt  Read Replies (1) of 5205
 
Eric,

This is in no way intended to dispute William's sound advice about learning before doing, but for you or anyone else testing the waters I suggest that as soon as you feel you want to put money on the line, find a broker with commissions that favor the small trader. I happen to use Interactive Brokers, where your 200 shares could be purchased for a fee of $2 and those two calls could be sold for a fee of $3.90. You will pay enough for learning the options game in the form of wide spreads, unexpected price action due to changes in volatility, option prices lagging the market, etc, etc without paying those healthy fees.

I have no association with IB, other than as a customer, and receive nothing for mentioning their name. I just think that starting small is the way to go and finding a place where you can do that at reasonable prices gives you a better chance of becoming successful. It's also good if you ever intend to use more elaborate options strategies to have at least a small account where you can explore all the possibilities.

Regardng LEAPS, I assume you are talking about doing calendar spreads using the long LEAP instead of buying stock. Generally that is a way of reducing your long side exposure and limiting your downside risk. With GX at these prices there is not a lot to be gained by doing that, unless GX drops another 40 - 50% in value. It can make a big difference for higher priced stocks. Many CCers do not have this alternative available, but if you can do it you can reduce your downside risk a lot.

Dan
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