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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 (7868)7/11/1998 4:05:00 PM
From: Bill/WA  Read Replies (2) of 14162
 
Herm & all,

Could you comment on this post from (news:misc.invest.options)
WH Ford from the Pitbull.com?

"Buy 100 contracts, $5 out of the money, @ $.35 each = $3500

1.) An at the money strike, the option will move about $.50 for every $1.00 the stock moves.
2.) At $5.00 in the money, the option will move about $.75 for every $1.00 the stock moves.
3.)At $10.00 in the money, the option will finally move close to parity with the stock.
That means that the stock MUST go up at least $1.50 JUST TO PAY FOR THE PREMIUM ON YOUR 35 CENT OPTION BEFORE YOU ARE EVEN IN A POSITION TO MAKE A SINGLE PENNY."

I'm a little 'slow on this' or my mind is drawing a 'blank'.

Is there another way to explain this??

Thanks in advance for the best site on SI,
Bill
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