How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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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 (5139)	10/2/1997 9:56:00 AM
From: jim clabaugh	of 14162

herm, let me spell out one of my situations and see if i understand your proposal. bot RDRT 26.5 now at 21.75 no options. options bid: oct 22.5 . . . 1-3/16 oct 25 . . . . 3/8 nov 22.5 . . . 2-3/8 nov 25 . . . . 1-3/8 jan 22.5 . . . 3 jan 25 . . . . 2 apr 22.5 . . . 4 apr 25 . . . . 3 if i sell any of these, i will lock in a loss if held til expiration. if i sell the aprils, and the stock stays flat for 7 months, the option will lose time value which is 100% of their current premium. that will lower my basis and keep the stock, if it stays flat for 7 months. but... if stk goes up, i will have to buy bak option at a loss to avoid being called out. the loss will be less than the profit gain on the stk since the delta is less than 1. or, if stk goes down, i can buy bak the call at a profit, but the stk will be losing more $ than the call because delta is not equal to 1. is the repair strategy just to reduce your losses, not prevent them, or actually repair back to neutral? do you have to accept that you will lose something and just try to limit the amount? thanks, jim.

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