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: RayV who wrote (8545)	9/12/1998 7:23:00 PM
From: Herm	Read Replies (3) of 14162

Hi Ray, Market marker in stocks reminds me of live auctions. Where everybody blows away the first few ask prices by the auctioneer. The bidders don't even make eye contact. The MMs in the stock market clear all narrow stops around the opening price right after the bell for the first 15 minutes. Easy money for them! As an investor, it is critical you know the normal volume for your stocks and the trading patterns. Does the stock trade up/down late in the day or early? So, if your stock trades 1,000,000 avg. and today it is trading only 70,000 by 11:00 AM you have a buyer's edge. The MMs are hungry and you can hold out for a better price. So, if you see a 1,000 block ask at say $40 and 2,000 block bid at say $39 1/2 you can see that the MM is sucking wind and will most likely drop the price. Why? Low stock volume and more buyers at a lower price. The flip side of that is true for increasing prices. Although, it would be more valid (reasonable) on a higher stock volume trading day! Those short up ticks followed by massive block purchases followed by droping prices is shorting. The MMs see that and recognize it. Of course, they get to see the names of the brokerages and size of the blocks on the system. They know how many limit order are out there! That is why the average investor is at a disadvantage without Level II quote system. Those lost 1/8s points add up real fast in the stock market. Dr. Elder did a really nice job explaining in his book, "Trading for a Living." elder.com Thanks for your question! PS - TECD looks like it will tag upper BB and correct soon! RSI is moving up like clockwork! Ride Em CC Cowboy! Did you load up on cheap puts? bigcharts.com

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