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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: William who wrote (1376)7/9/2001 9:49:45 PM
From: alanrs  Read Replies (2) of 5205
 
Yes, I agree, and actually make the most $'s if it is called away- $153 on the first sell and buy back, $406 on the second sell, and $583 on the actual stock, all net of commissions-$1142 total on a $3902 investment in one month.
(29%). And I would have it all in cash, but it would really be $765 after taxes.
If I buy it back at $100 ($113 w/comm.) I will have made $446 total on the same $3902. (11%). (or $298 after tax).
This would reduce my cost on the 100 shares from $3902 to $3604. If I wanted to own the stock, and I do, I would be better off if I could buy it back at anything below $43.69 (my new adjusted cost plus the profit on the called away position). (Did I do that right? This is starting to feel like work!)
Plus I have to factor in the new sell a put strategy as a possibility.
HMMMM. I guess I'm so used to writing against stock I really don't want to have called that I'm in the habit of buying back and "protecting my position".
So now I have to figure if I think I can buy the stock back at less than $43.69, or sell a cash covered put at 40-45?
I can see why people paper trade.

Thank you for pointing this out. If you have the patience to read this post and see any other glaring oversights, please let me know.

One of the reasons I post this minutia is to have my faulty reasoning pointed out.

ARS
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