How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: John B. who wrote (4095)	8/23/1997 11:01:00 AM
From: Rodney Lockhart	of 14162

John B. As an option goes further into the money the time premium shrinks. That is because the option purchaser is assuming more risk. The following are the current values of the options per a Black-Scholes option pricing model: NOV 60 --- 38 3/4 NOV 65 --- 34 1/4 NOV 70 --- 30 NOV 75 --- 26 1/8 NOV 80 --- 22 1/2 NOV 85 --- 19 1/8 NOV 90 --- 16 1/4 These appear to be in line with the 4PM Bid /Ask. I think a 95 call will open up since the stock is at 97 1/2. A Nov 95 call should go for 13 1/2. I like a covered call using a Nov 95. Also a bull spread using Nov 75s and 95s would have a 50% return if CYMI is at or above $95 in Nov.

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