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: Gary E who wrote (9665)	2/21/1999 5:28:00 PM
From: Herm	Read Replies (3) of 14162

Hi HG! The other two responses in addition to mine (as the time of this writing) illustrate accurately the various was to benefit from CCing. No examples I use advocate going naked! And, I would only suggest the use of margin for rounding off shares to obtain an even lot. So, if you CC and get enough premies for an additional 66 shares, then use margin to obtain the balance of 100 shares. The more contracts per CC round the lower the commission bite and the higher the rate of return. Now, I will say this about a declining stock price and CCing. Without CCing under those conditions an investor would lose money quickly. By ccing, a person can sell deep in the money CCs and offset a major portion of the decreasing capital. In other words, CCing does offer a form of a hedge against losses. Buying PUTs while CCing could offer even more protection and perhaps a profit while the stock is dropping. I hope that provides you with enough examples! Thanks for your question HG!

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