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 (7857)	7/10/1998 5:14:00 PM
From: FruJu	Read Replies (1) of 14162

Hi Herm More on the VVUS saga My short AUG 7.5 CALLs which traded for 3 the other day (I sold them short at 3/4) are now trading at 1/2 again :) Boy, this stock has unbelievable volatility! But I did take a calculated risk last night before earnings and bought JUL 7.5 PUTs (and very cheap JUL 10 CALLs at 1/8 just in case of a shock announcement at the conference call like a buyout). Made a quick double on the JUL 7.5 PUTs when the stock dropped another 1 1/8 back into the 6s (from 6 to 10 and 6 in the week :)), which lowered my NUT another 5/8, and closed the July 10s out at 1/16. So, now I'm still long the original shares, and still have the short AUG 7.5 calls, but now with a NUT of 8 1/8 (considering I started at 12 1/2, it's a lot better than just having sat on the stock as it's halved in value!). Still feel that it has potential for sticking around here for the next couple of months, but will get out completely if it looks like another dismal quarter is on the books in two months time. Oh, just a question out of interest. When you're buying cheap upside and downside protection, do you usually buy the same number of options as the corresponding underlying stock you own, or do you vary it depending on your feeling for which move is more likely. E>

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