Dan,
I hate to say this, but if you had just sold 10 May 20 calls, and turned the computer off, you would have had a 11 1/2% ROI for May without exercise, and an upside potential to your 20 strike, which would have given you a 24% ROI for May. This would also have given you 14% downside protection,to 16 9/16, which is double what McMillan recommends. I presume that you love the stock, so without exercise, you could just start the dance over again for June. I recommend saving your trading "silver bullets" for when you really need them, not just to pick up a few 1/8s in day trading your covered calls. I also cannot recommend trading "on-the-fly" until you have at least 500 trades under your belt, and can divide 17 by 32, and actually get the right answer without using a calculator. I've done nearly a thousand trades in the last two years, and I still plug it all into a computer spreadsheet before I trade...especially these covered call, straddle combinations, which give me a mental headache. (also, I don't have a clue what 17 divided by 32 is...more than 1/2...I think.)
I assume that Herm will comment on your stock selection regarding fundamentals. You plainly used a daytraders' thinking to jump on this one today. The 5 minute chart for the close yesterday made it pretty clear that the stock was going to gap before the open. After that, it acted like virtually every strong gapping stock does...it jumped up for another 20-30 minutes, then fell hard, recovered a bit with lots of jitters, and then fell the rest of the day. I really recommend Jake Bernsteins book, "The Compleat Day Trader" if you want to learn about classic 5 and 15 minute trading patterns, and rules for entering trades like the one you did. I also recommend the use of IQC's real-time chart service for stock day trading. It is the best tool I have ever seen, if you believe in TA voodoo (which everybody that day trades does, including me). Finally, DATEK's real time Streamer service is worth opening an account with them for $2,000. Another "best on the web" for dead accurate quotes and activity as it happens. Too bad DATEK doesn't do options. We would all have the broker we want. |
