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 (7822)	7/6/1998 12:07:00 PM
From: robert weisberg	Read Replies (1) of 14162

I am new to this board and have been reading posts from many others including Herm who seems to know his stuff :). My observations of using covered calls are as follows. I believe there are 3 different reasons/strategies for using them... 1) Selecting stocks that look like quality issues but have good premiums. The basic ides is to not care about getting called out, and making money each month on the premium. 2) Using cc as a way to buy stocks and play some monthly appreciation by selecting issues out of the money and trying to make some money as well as using the premium to lower you cost of the stock. 3) Using cc as an insurance against holdings/and to create monthly cash flow and profits. I cant see any good reasons why somebody with a big stock portfolio not use cc at least as some insurance on drops. You can always avoid getting called and you can can always pick out of the money options. This works well when somebody has some large holdings. Also I did some straight options buys a last year. I was right most of the time but I still lost money. the time factor is so critical. Most of the calls I bought would have worked out if I had a little more time. the same goes with my puts. With covered calls if things dont go your way at least you have the underlying security and you have more chances to sell against them and make some money. If I only knew about covered calls last year I would have made some great $$$. Bottom line is that having the underlying keeps you in the game even if you are wrong. I look at it this way: when you buy an option you have time working against you. If the stock is flat (assuming an in the money play) you may lose it all, if the stock drops you lose, if the stock gains you make some money. 2 out of three possibilities mean a loss. With covered calls you make money if the stock is flat! Right now I am playing TDFX 17.50 has some good premiums. I also like EGRP. Also I have no problem looking for flat stocks to pick up a premium. One last point. There is no faster way to lose money than buying puts and calls at will. At least the cc you have the underlying.

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