SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: the options strategist who wrote (7084)3/16/1998 7:49:00 PM
From: Herm  Read Replies (2) of 14162
 
Hi Jen,

Let's tackle your first series of questions.

You have probably discussed this but can you tell me if there is a
particular time one should use cc's vs. bps or bcs. other than the
fact that you own the stock vs. not owning it. I think I read way back
in the beginning where someone said they felt the bps was a better strategy with that particular stk than using the cc but I did not get why.

Assuming bps means buying PUTs and bcs buying CALLs, there are merits for each approach compared to CCing. If you already own the stock and are long then you don't normally lose anything by CCing for the extra income. That is, provided your net cost basis (NUT) is lower than the strike price of your CCs. Also, any normal downward stock price movements expose you to the MOST risk anyway! At least, by CCing you are making premies which offset the downward price movement of the stock. It you can learn to time and move in and out of CCs you will make more money in the long run than just owning the stock long.

Doing option spreads takes much more skill and knowledge. First, you have to be a very good stock picker and be able to read technical charts to assist you with the spread selection. Knowing what the stock may do then dictates the option spread to use. The risk and gains for option spreads are normally predetermined by the very nature of the spread.

Doug's site can provide you with most of the goodies we have come up with at webbindustries.com. Study the recovery spread template. It is a beauty of a strategy which yields more than straight CCing.

Your reference to buying PUTs vs CCing had to do with the concept of when a stock is just about to peak out and reverse price direction. If you suspect a reversal you can either buy cheap PUTs at the peak as a sideshow and cash them in when the stock bottoms out. The PUTs will be the cheapest when the stock price is high. On the other hand, when the stock price is at it's peak you can also see an in the money or at the money strike price call say two months out and grab a hugh premie. As the stock price drops that CC premie will erode very very fast. Hence, you can close (cover - dippity do) your CCs and pocket the difference in premie and setup for the next move.

And finally, you could both of the above in unison with the price movements. What ever floats your boat Jen. Some people have made a bundle following our suggestions.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News