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: Joe Waynick who wrote (7808)	6/30/1998 9:21:00 PM
From: Tom K.	Read Replies (2) of 14162

<<Can you give an example of how you would apply this strategy? >> Joe, In March, Compaq was selling around 29. I sold 3 APR 27.5 PUTs for a net of $481.23. I was expecting the stock to go higher. However, by expiration the stock has dropped to 25 and I was "put" the 300 shares at 27.5 for a net outlay of $8269 (actually only $4135 on margin). I immediately turned around and sold 3 MAY 27.5 CALLs for a net of $162.49. The stock came back to 29 and I was called out for a net income of $8230. So in the end, I owned no stock. April PUT $481.23 May CALL 162.49 cash received $643.72 (I lost $38 on commissions for the stock trades). Hope the example helps. Tom

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