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

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To: Douglas Webb who wrote (8772)	10/7/1998 1:07:00 PM
From: Vol	Read Replies (3) of 14162

Re: naked index calls Long time no post, I know. Been real busy lately. Got a new scheme I'm working on. The plan is selling out of the money index calls each month to provide a little income and to somewhat hedge my long portfolio. I did some spreadsheet work and noticed that OEX and SPX very rarely closes above 8-10% from the previous month. Rarely = less than 3% of the time. I'm looking at selling the next month out OEX/SPX call naked at 8-10% above its current level. Example: 10/6/98 SPX 985 9% out = 1075 Nov 1075 call 12.8 bid Margin requirement = 98.5 (10% of the index) One and one half month return = 12.8/98.5 = 12.6% Approx 8% per month A few caveats: 1) I would keep 2x the margin requirement to be safe. Still is 4% per month. 2) My long portfolio covers the margin. If the market goes up (therefore my margin requirement), so does my portfolio (since it is diversified enough). 3-4% per month = 40-60% annualized Have I been smoking something? Can someone shoot a hole in this plan? Vol

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