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: backman who wrote (9042)	11/15/1998 4:11:00 PM
From: Herm	Read Replies (2) of 14162

Thanks for your interest and question for the forum. This is a real case study and there is nothing like seeing the real thing in action. Now, you stated you wanted to understand the "nomenclature." As in "the act(s) or process(es)." In other words, the parts of the puzzle. SUNW - Technical Chart 1. In W.I.N.S. terms, SUNW is now in [d]ecreasing price movement under normal trading cycles. Stocks don't up for ever, just like stocks don't down forever for the most part. You can know little about the industry group a stock is in and still be able to pick stocks that are going through an upward price moves or downward for short lenghts of time spans of say one to two months out! How? Using the technical indicators of the Bollinger Bands (BB) and the Relative Strength Indicator (RSI). Look at the SUNW chart below. askresearch.com 2. The lines above and below the price are the upper and lower BBs. The second chart quadrant is the RSI. The tags (price reaches or passes to or beyond the BBs) signal the approx. reversal for the majority of the time. News will sometimes impact the BB and RSI. 3. Right now, SUNW is EXPECTED to go downward until approx. $50. Why? Because that is what the technical chart reads as indicated by the recent upper BB tag now moving downward and the recent RSI peak now moving downward as well. You can take it to the bank that SUNW will most likely tag that lower BB at $50. Enough lurkers have emailed me over the past year to confirm that fact. 8 out 10 times it will do just what the chart reads! That is fantastic odds and the difference between keeping your money and losing it! As far as CCing! It makes it equal to black jack for the casinos and you are the house! The CCers will eat losses everytime just about! 4. If we expect SUNW to move downward then selling a LEAP CC for fat premie dollars is a hedge against you losing money! Yes? Who pays? Your CC buyer of course! His/Her LEAP is worth much less at $50 than they paid at $60. They may have paid you $27 and you may be able to only pay back to cover at $17. Once you cover and the stock recovers you are still long on the stock and can repeat the process to make more money! This is a very basic fact. More money than you started in your account means you are making profits. As long as your net cost basis is less than the selling price you always have the upper edge to control your risk with the CC options. Summary: The 50JAN01 means nothing! All you are doing when you sell LEAP CCs is buying time with a hedge position. When the chart reads cover, you do so and pocket the difference! If you are not able to make 40% to 60% just using this W.I.N.S. approach get a hold of me via email. I want to hear what you are doing. I'm also interested in learning how people lose money that way I can avoid making the same mistakes. As a child, I pondered once, "if you don't want to be poor, just look at what poor people do and simply don't do it." There must be a reason right?

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