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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Wayners who wrote (8324)	8/21/1998 3:51:00 PM
From: Douglas Webb	Read Replies (1) of 14162

The first stock I checked in my watch list that's between $20 and $30: XIRC: Last @ $26.688 -- $20 calls in-the-money by $6.688 Aug98 20 Call: $6.000 x $6.500 - TVal = (11/16) Sep98 20 Call: $6.625 x $7.125 - TVal = ( 1/16) Dec98 20 Call: $7.125 x $7.625 - TVal = 7/16 = 6.5% of $6.688 Mar99 20 Call: $8.000 x $8.500 - TVal = 1 5/16 = 20% of $6.688 $25 calls in-the-money by $1.688 Sep98 25 Call: $2.438 x $2.813 - TVal = 3/4 = 44% of $1.688 Dec98 25 Call: $4.125 x $4.500 - TVal = 2 7/16 = 144% of $1.688 Mar98 25 Call: $5.250 x $5.750 - TVal = 3 9/16 = 211% of $1.688 My point? I said you could get $2 of time value in that example because that's 20% of the in-the-money amount, which was $10. As the quotes above show, it's not hard to find in-the-money calls with time values 20% of the itm amount. Btw, I never said anything about the calls being just two months out. The longer-term options will gain and lose intrinsic value as the stock moves up and down. So long as the volatility doesn't vary widely, the time value won't change much, which means the premium will track the stock price fairly closely. That's why this strategy works. Doug. Doug.

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