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

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To: Petrus who wrote (8373)	8/26/1998 8:42:00 PM
From: Caroline	Read Replies (1) of 14162

Petrus, I am asking many of the same questions. I've been looking at the following: tscn.com tscn.com tscn.com tscn.com tscn.com tscn.com Generally you want to sell the next month out. We'd be selling September. But if you know you're going to sell again in October, why not save the extra commission and sell October now? It's the difference between 6.25 (September) and 11 (October) and 14 (November). And there's the answer. If I can get 6.25 for one month, I want 12.50 for two months and 18.75 for three. So I stick with September on the 130. But it's much better at the 140 strike: 2.75 (September), 6.25 (October) and 10 (November). If I can get 2.75 for one month, I want 5.25 for two (so 6.25 is cool) and 8.25 for three (10 is just fine). The 140 strike has another strong appeal: I don't want to sell my DELL, I just want to use it to generate covered call profits. With the split coming up and the damn thing roaring through barriers at $4+ per day, it'll pass $130 before the third Friday in September. Maybe 140, too. After all, that's only $70/share post-split. So I eliminate the 130 strike because the shares are too likely to get called. At 140, the 2.74 premium for September seems low in comparison to what DELL's generated for me in the past. That leaves October 140 or November 140. These are both excellent returns. Now the only demon is how in the middle of "crash time" those expirations live. Good luck, CB

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