Herm,
My initial intention was to use this as a learning process on how to write covered calls the smart way. I have been learning about this process for about two years w/o committing my money. Up to the point when I started reading your thread, what I had encountered were long lists of covered calls yielding 10% (or higher) returns. Frequently, in the days following, the underlying stock lost more in value than was derived from writing the covered call. The education I am getting on this thread (also from many of Steve's inputs in various threads)is invaluable.
I still have quite a lot of learning ahead, however, I think this is what you do:
1) first, select a company with excellent fundamentals;
2) use technical analysis to pinpoint the timing of your entries and exits; and,
3) with these two factors in place you structure a multitude of option plays (most of the time leading to a long season of covered call writing).
On the VVUS I picked 5 contracts, July 22 1/2 @ 4 5/8 and 5 contracts @ 4 (I was in before the dip last week). I am not sure I can handle your alternative #3 yet (looks ominous to a newbie). Would it be done by exercising Thursday, writing September/October 35 strike price covered calls on Friday, the PUTS and CALLS later on, depending on whether the stock went up or down?
Herm, thanks a lot for your input. Gave me a lot of choices!
(By the way, your posts are missing the first letter of every line, don't know if you had noticed) |
