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Strategies & Market Trends : The Covered Calls for Dummies Thread
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From: Elliot F7/5/2006 3:32:06 PM
   of 5205
 
Here's an interesting covered call I just managed to execute: bought AGIX at $13.09 and sold the Jan 2008 12 1/2 call at $6.50 (slightly over the bid price). By selling this particular call, my buy in price was reduced to $659 for each 100 shares. If the stock stays above $12.50 by Jan 2008, that's nearly a 90% gain in about a year and a half ....AND that's without the stock price increasing from my actual buy in price. The downside risk is minimal since the stock can drop to $6.59 without any loss ...AND there's been some insider buying recently which signals the stock may in fact have a run.

Personally, I'd rather buy a stock and get close to a double by using a covered call strategy with no movement in the stock compared with buying a stock that absolutely looks like its going to break out and wait for a double to occur.

I use covered calls frequently and highly recommend it as a conservative strategy when there is a high call premium for a stock in a market that is volatile such as the one we are in now.

Elliot
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