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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Herm who wrote (4097)8/23/1997 9:53:00 PM
From: John Rountree   of 14162
 
Herm,

In terms of writing a covered call, I would think you want a large NUT so that as time progresses the time value (or NUT) diminishes even if the stock doesn't move up or down. Do I have the definition of NUT correct?

With the DOW acting so volatile and channeling 7500 to 8000, I find it valuable to write (as best I can) at the money calls. They have the most time value, and are somewhat bearish on the stock. In most cases, I only write them if when I get called out and at least make a slight profit. But if you go out a couple months, you can watch the time value dimish and buy those suckers back. OR if the stock goes up and down you can buy and sell, buy and sell and create a cash flow generator from this indecisive market. And the larger the premium, the lower you can watch those calls drop. Make sense or is there something fundamentaly wrong with this strategy?

If I owned any DOW stock, I could have done well with this strategy.

John
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