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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Jerome who wrote (4397)	4/14/2006 5:35:09 PM
From: Uncle Frank	Read Replies (1) of 5205

>> Do you unwind your covered call positions prior to expiration if you expect that will expire worthless? Any general rules that you suggest? This is complicated stuff, and stock specific. My approach will be based on my expectations for the underlying stock, and also the price/date at which I acquired it. For example... I wrote the April 65 option on SNDK on 2/27, and received a premium of $4.10/share. The stock is trading at roughly the same level as it did when I wrote the option, but the call is still commanding $1.60 with only one week to go until expiration. I'm prone to wait for the call expire, because I don't think the stock's going to run above 65, and $1.60 is a big chunk of premium. But even if the stock rises above 65, my return for the transaction will be 69.10, a 22% return on my purchase price of 56.65 on 2/24. There are so many angles to this game... duf

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