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 Webster who wrote (4163)	8/27/1997 1:01:00 PM
From: Herm	of 14162

Hi John, Thanks for joining in on the conversation. With the VVUS earnings report coming out on Oct. 17, VVUS is bound to hit $30 and bounce around at first. So, it is fair to say $27 1/2 strike price will be called out on the Sept. 19 expiration. As of this writing, there were 4,008 open contracts for the Sept. 27 1/2 and 3,034 open contracts for the Sept. 30s. stocksmart.com stocksmart.com Should you roll up! Yes sir! Cover now and wait a while. You may want to roll up to either the Oct. 30s or Dec. 30s. Personally, I would roll the dice and go for the Dec. 30s from your position. 1. You will get back a larger premie to offset your give back on the cover (closing transaction) for the current CCs you sold. Also, the larger premie will lower your net cost basis big time. 2. You could use the money to average down VVUS and sell more CCs. Use your margin if you need the extra money to get a full lot. 3. You stand a good chance of covering at that $30 resistance level when VVUS pulls briefly pulls back. A double dipper is likely for a shorter length of time (month) and at different strike price. 4. With more money in your pocket you have greater downside protection. There is nothing worse than a pull back when you are trying to make minor repairs to positions. That earnings report is going to cause some doubt in the minds of those holders that paid $30 to $31 for VVUS and have not been CCing. This will be the first opportunity to bail out. There is bound to be profit takers off the $24 rebound also. There is no way you will be called out before October since the break even would be around $35+. Even if they do call you out your net will most likely be around $23+ range.

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