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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Bridge Player who wrote (4554)	11/12/2006 2:07:26 PM
From: Hepps	Read Replies (2) of 5205

Even though I'm just getting started with Options, I've been thinking of some calls and put combos on QCOM as well. While I haven't pulled the trigger on anything, I'm having a tough time resisting the Jan 07 series. The fundamentals are (ignoring fees) that I take 7K in cash(Roth account), buy 100 at 35.20, sell the 37.50 call for 140, sell the 32.50 put at 110, and wait it out. Worst case I've locked in 200 shares at 32.60 (3520 - 250; plus 3250) and can resell calls. Best case I get called out for a 7% gain on 67 days. Maybe not the best return/day, but it gives me a set of outcomes that I can live with, 200 at 32.60 or 100@35.20 and 3750 cash (with another call option to sell) or sell 100@37.50 for a total of 7500 cash. As I said, I'm just getting started, so comments are welcome. I seems to me that selling covered calls is half the solution; selling puts against cash at the same time may deliver additional insurance, as you're insuring that one of them will undoubtedly expire worthless.

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