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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Ken R who wrote (4791)	3/8/2007 5:13:47 PM
From: alanrs	Read Replies (2) of 5205

If you're required to remove roughly $10K of something, and you have roughly 5000 shares of Qcom in the account, you have a lot of possibilities. For instance, you could sell calls against quite a few shares (say 1000-10 contracts) with strikes way out of the money. Right now you can get $35 for the April 45. The market and Qcom have been up, so sell 2-3 now. If it continues up, sell a few more, either at that strike or a higher strike. You could easily make $5k a year doing this while only risking 1000 shares being sold. If you were nimble and good at this you might make the whole $10k between options and dividends. Or you could sell fewer options closer to the price of the stock. Right now the April 40 is worth around $200 and the April 42.50 is worth around $90. Or you could start the year selling way out of the money and if nothing got called away, finish the year selling at the money. Or you could decide what you would be satisfied with and go much further out in time to get a one time higher premium. Covered calls are simple, but there still are a lot of ways to go about it. I try to only do things that I'm comfortable with if the worst possibility comes to pass. ARS

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