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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: PoetTrader who wrote (3008)11/12/2001 9:00:45 PM
From: Dan Duchardt  Read Replies (2) of 5205
 
PoetTrader,

So here's a question to you and the thread... at what juncture do you usually start making repairs? As soon as you've hit your strike price...roll out and up one or two months out?? Is there a rule of thumb??

The rule of thumb I picked up somewhere along the line is to repair at the breakeven point for the call buyer, which is the sum of the strike price plus the premium paid (in your case received) for the call. If the price gets to that point, and you are still bullish on the stock, at that point it may even make sense to just roll up in the same month series. Given your belief that a pull back was in the cards, that would not have made a lot of sense. At this point I see no reason to rush into anything. Your downside risk is minimal, and the closer you get to expiration the better you will do if you decide to roll out. Who knows what will happen in the next couple days in this environment?

Dan
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