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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: PoetTrader who wrote (2536)	9/28/2001 7:43:03 AM
From: Road Walker	Read Replies (2) of 5205

Poet, re: I'm just trying to day trade some options to help resurrect a decimated portfolio... Day trading covered calls really isn't the best way to go. The essence of the covered call advantage is time premium erosion, and you lose that advantage by quickly trading in and out. Also, as the stocks go down, the volatility portion of the position goes up in value, so you are not maximizing profit. For day trades, you are better off just shorting the equity, where the pay off is dollar for dollar on the stocks movement. That said, I do it anyway <g>. I figure as a confirmed dummy, that with a day trade on a cc, if I am wrong (frequently) the worst that can happen is that I get called away at a premium to the price at the time of the trade, not a terrible end. With a true equity short, I'm dumb enough to lose real money. John

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