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: Herman J. Matos who wrote (4)	2/9/1997 2:59:00 PM
From: CCWriter	of 14162

RE: Very nice! I believe you have a winner here. Herman, FIRST: I've been doing covered calls with mixed success for several months now. Most of my positions have been profitable. Back in September, I purchased shares of Duramed Pharmaceutical (DRMD) on what looked as a down but strengthening stock price. My intent was to hold off for a short time while the price strengthened, then sell the call contracts. During this wait period some bad news came out about a FDA hold in approving one of the companies medications. The stock price began to drop. It quickly settled at about half the price I payed for it. Well as we all know a 50% drop requires a 100% gain to get even. At that point I determined that the only thing to do was wait for the stock price to regain its lost ground. So I just held on. I noticed that the share prices were channeling in a trading range. I decided to start generating some income with the intent of bringing my cost basis down to the stocks current price. I sold the call contracts at the resistance level with the intent of buying them back when the stock price approched the support level. To make a long story short, I was eventually caught above the strike price on expiration and got called out. I never did make back all of my losses but I did make back a good amount. The point is, I see thinking and strategies in your posts that would have helped me milk this position back to profitability. I am really looking forward to following your thread. SECOND: I like the format you have set up here. I have always believed (especially after the DRMD experience) that a companies fundamentals are very important. I appreciate your commentary on why you want to own the stock. I believe it is of primary importance. The details of your thought process give me ideas for consideration in my future positions. I am looking forward to getting a copy of your Excell spreadsheet. I am also looking forward to your real-time accounting of the establishment and maintanance of this position. Once again I think you have come up with an exceptional format for teaching covered call writting. Looking forward to interacting with you. Keep up the GOOD work. Thank you for your efforts. Blaine

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