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: Greg Higgins who wrote (10231)	4/4/1999 4:21:00 PM
From: NateC	Read Replies (1) of 14162

Greg, you wrote, "With a stock at $60, and a 2001 35 Leap selling for $29, you pay $4 for time. Assuming you can get at least $1/ month, you've paid the investment in only 4 months. Since you usually get more than $1 per month, it's paid off pretty quick. If you're at the money, you might be paying 15-50 for the same time. At the higher prices, the volatility will give you higher short term premiums, but may also reduce your profits if the stock rises or falls precipitiously. Greg..in this scenario....say you like stock XYZ which is at 60, and you buy the Jan 2001 35 Call LEAP for 29. If you did that tomorrow....would you then sell the May 65 CC, then the June, etc?? What would you do near expiry of the CC....would you always buy it back and roll out (up)?...If you get exercised on one of these CC's...you'd lose the $29/share you paid for the LEAP, right?

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