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 (4145)	8/26/1997 8:42:00 AM
From: Herm	of 14162

Think of it this way! If by Sept. 19 VVUS is near 27 1/2 it will move the stock towards that mark since the stock buy back program is still in place. So, 27 1/2 is a good candidate for being called out! The Sept. 30s is a pretty stiff price climb at this point by Sept. 19 expiration date. I doubt it! Yes, it is the most conservative and would still reward you if called out at $30.00. A long shot! Writing the Oct. 30s will reward you now by giving you a nice premie and may be in the money on Oct. expiration date which is also around the next earning report date. Here is my thinking! I figure if I have some money in my account now (the premies I collected) 1. I'm paying less interest on my margin. 2. I have extra margin to dive in at anytime. 3. I lower my net cost basis right away and lock in a new profit level. 4. I can always either cover or buy additional CALLS to leverage my VVUS gains using the money from the premies. 5. I have a downside insurance policy by holding the nice premies in my account. 6. There is always the risk of a market blowoff at this point not to mention we are getting mightly close to the end of the year fund managers house cleaning. Now, with all that said, I want you to know I'm not trying to convince you one way or another. But, I am saying that you do need a reason, a plan, or experience to base your decisions on. And of course, follow thru with that plan. What ever your risk/reward comfort zone is. Remember, I have reduced my VVUS net cost basis from $27 down to about $23+ by CCing and the stock is still in the original price range when I started. That's the beauty of CCs and steady cash flow. October is a LONG TIME AWAY and I have no idea what is going to happen. In the meantime, from my standpoint I want more of a sure thing. "A bird in the hand, is worth two in the bush."

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