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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Herm who wrote (5134)	10/1/1997 5:48:00 PM
From: Douglas Webb	of 14162

Herm, the problem I've been having with writing calls a few months out is that those calls have lower deltas than closer calls do. For example, I own 800 shares of UGLY. I can write the Oct 15 for $7/8, or the Dec 15 for $1.25. I get a bigger premium if I write the Dec, of course. Let's say UGLY then drops from $15 to $13 in two weeks. The Oct call might have a delta of 0.5, so it'll drop to almost nothing. The Dec call's delta is more like 0.15, so it'll only drop to $0.95. Covering the Oct call is a painless, happy event; covering the Dec call is hardly worth the commissions. BTW, I'm planning another addition to my research page. Think it would be handy to see all the options available for a stock, with current prices (20-min delayed), implied volatility, greeks, maybe even graphs showing time decay? I might get real fancy and write a java applet for the graphs, so you can play around with the six(?) inputs to option pricing dynamically. Doug.

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