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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: alanrs who wrote (4220)4/17/2004 3:00:34 AM
From: Jon Khymn  Read Replies (2) of 5205
 
My goal in this experiment:

1. To find a maximum "Call premium/ stock price" (if the stock price is $10 then I would like to look for one month premium of $0.7 or higher. If the stcok price doesn't change in one month, then I would net 7% per month)

2. Try NOT to time the stock buying or option writing. Just mechenically keep write a call that are about one month away in expiration, then cover near or at the expiration day.

3. And see if the "time element" is on my side (option writers) over the long period of time...

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Few questions:

1. On May 21, if RMBS price is 27 but I don't cover RMBS 25 calls that I wrote, then my broker will call my RMBS shares at 25 to satisfy option or just charge me the difference, which is $2?

2. If RMBS stocks are called, do I get charged for commission? (For stocks and/or option)

3. If RMBS price ended at $22 so my $25 call writing is worthless, do I have to do anything or will it just expire and thrown out to garbage can?

4 One tax question: Let's say I gained $5 from selling CC (realized gain from CC option trading) but I didn't trade stock. Then do I have to report $5 as realized gain or reduce the cost basis of my stock? (which will defer paying tax till I actually sell the stock)

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Ok, I'll try to read few hundred posts from the beginning...

By now you should know that I am not a risk taker but a risk SEEKER. ;o)

Regards,

Jon
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