How To Write Covered Calls - An Ongoing Real Case Study! Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: NateC who wrote (10488)	4/22/1999 12:59:00 PM
From: Hectorite	Read Replies (1) of 14162

Nate, I think your calculations are wrong. Excerpt from your scenario: "bought an underlying at 22, and sold the 25 call for $2...(Stock goes to 27)...pay $3 to cover...We now have the underlying at 27, and the full 5 on the runup.....but we've spent $3 in buying back..so we have a net $2 on the underlying...plus our original $3 premie....for a total of $5. It's the SAME, it seems to me." The original was 2, not 3. So here's what I get with stock at 27. Do Nothing: +3(stock)+ 2 (short prem)=+5 cover: +5(stock)+ 2(short prem)-3(cover prem)=+4 (worse than doing nothing) Roll up and out: 5 + 2 -3 + 2(assumed)=+6 Now if it goes up to 30 you make out best by rolling (8+1(net prem)=+9), but you raised your downside protection level up to 21 form 20. If the stock went from 22 to 27 in a short period the technical support levels might have well shifted up too so that giving up a little protection may not be a big deal, depends on the stock of course.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next