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: bill mccarthy who wrote (8052)	8/3/1998 6:18:00 PM
From: Herm	Read Replies (1) of 14162

Hi Bill, I must tell you that I have not had a stock exercised on me that I did not intentionally plan for(since I discovered the sequence and applied them - over a year ago) in order to grab up the premies to work with. Historical vs. actual data is worth something to base your application of trading rules. The charted data visually illustrates the dynamics involved in the movement of the stock price and volume patterns. A little effort will even reveal what internal/external conditions created those market reactions. Backtesting is also the only way to see how your rules hold up. If you have been following our forum, you know that in addition to knowing the major dates for events (splits, dividends, earnings) we closely follow the technical indicators: Bollinger Bands (BB) and Relative Strenght Indicators (RSI) as our timing guide for major price reversals. The application of our technical indicators can be used for other types of investing. My feeling is that you really short change yourself (and raise your risk to losses) if you attempt to CC without buying PUTs/CALLs as a side show. That is, you need to use your CC premies to leverage and make more money than the price increase/decrease in the underlying stock itself. If you can predict the major directions, you can really relax and allow the "trend to be your friend." In response to your question, if I purchased a stock that went from $20 to $12 on unexpected news, I'm saying that I could at the very least recover from that disaster faster and perhaps profitably than most investor not employing any of our trading rules. I know that first hand and I still have my investment capital to encourage me to continue. By the way, there are reader of this forum that confirmed that as well. How do you avoid pitfalls? Cheap PUTs when major announcements are being made and alot of praying. The stock market is not without risk. Invest money you can afford to lose without taking food off the table or hurting your family.

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