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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Uncle Frank who wrote (4006)10/21/2002 1:17:15 AM
From: cfoe  Read Replies (1) of 5205
 
Hi all. Long time since I posted.

I had been out of QCOM for a while, then back in hesitantly. Now in for a bit of a run and I have a question on CC strategy.

This refers to my IRA account. I had some shares from around $27 and sold at $33.70 (wanted to lock in my profits).

Now considering when and how to get back in. I expect a pullback in price before the earnings release (11/7). A knowledgeable poster on the Buying Range thread is looking for a pullback to under $33.

So here's my strategy.
Buy the stock tomorrow and sell equivalent CC. The CC I am thinking to sell is the Jan 03 $35 strike (yes, in the money) for about $5 and change. If I do this, my net cost will be about $31, almost $3 less than I sold for. If the pullback comes, I plan to buy back the CC for a profit, while still keeping my net cost under what I sold for. If we do not get a pullback, or a sufficient one for me to buy back the CCs, I will have bought the stock for its current price (say $36.20) and sold it for $40 and change.

Although selling the $35 vs. OTM calls leads to a lower potential profit, I chose this strategy as the more conservative one.

Another possibility would be to do the same thing, but with the Nov 02 CC at about $3.10. A little less profit, but the ability to do the same thing a couple of times.

Or, I could wait for a pullback and buy then at less than I sold it for.

Any thoughts on the above will be appreciated. TIA
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