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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 (8145)8/9/1998 9:49:00 AM
From: Senator949  Read Replies (1) of 14162
 
Herm,

Further to my previous post. Initially the reason I was selling what
I thought was deep in the money is because I was hoping I would get
called out. My nut on my CPQ shares is 28.4 and I've only been
holding since May so 35 3/8 would have been a very good return. The
reason I was hoping to get called is because the "call of the north"
is getting really strong. With the Canadian dollar at all time lows
there must be some really good buys.

One I was looking at is CIBC, Canada's largest bank. It's 5 year
chart from YAHOO (CM.TO) is as straight as an arrow with the
exception of a few notches caused by earnings warnings. Well on
Friday before the bell I guess, because it opened at the day low
(-9 from the previous close), CIBC issued a profit warning and lost
15.6% of it's value on the day. It opened at 35.05 rose to 40.10
within the first 20 minutes and then started drifting lower with a
couple of big drops until it hit about 36 and then started climbing
again. It made it back up to about 38 by 3pm and then drifted down
again to close at 37.15.

I think it's chart looks pretty good for W.I.N CCing if you use a
10 BB and 8 RSI. You can look at it with a symbol of CM and CDN on
askresearch. I guess my question is, how long will the earnings
warning effect the price? Would Monday be a good day to take up a
position?

I don't really want to lose my CPQ position because I think it is a
long term winner but I really do think there is big short term money
to be made because of dollar exchange rates. Also I really don't
want to use my margin unless absolutely necessary, therefore my
stategy is:

1. Let my CPQ CC's get called out if they really want them.

2. Buy JAN 30 CM (CIBC) calls at ask on Monday opening. At the close
on Friday the Bid was 8.15 and Ask was 8.40.

3. To maintain my CPQ position buy Jan 30 calls when CPQ hits the
lower BB again.

4. If the CPQ does get called out, call out the CM shares.

Is this a sound stategy? Any suggestions?

Thanks,

Robin
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