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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Greg Jung who wrote (629)3/11/1997 11:02:00 PM
From: Herman J. Matos   of 14162
 
Hi Greg,

Repair of Stock Drop in Price:

> You said, sell at-money CC then with those proceeds buy at-money calls. I
> suppose those you sell are further out than the ones you buy, so suppose 1$ > left over that might pay commissions and leave some change. If stock is not > > up until after options day then you are expose to loss of the upside.

Hummm, I stand corrected! It is confusing and I did not expressed in writing what I was thinking. It should have read sell out-of-the-money calls and take the proceeds and buy lower at the money calls yourself.

Example:

Stock at $38 and moving up on a trader's bounce!

Buy five (5) June 40 calls @ 3
Sell Ten (10) June 45 calls @ 1 1/2
----------------------------------------------------
net cost 0

Table of content is good. I don't know how this web site can edit past posted information to clean house and condense the information. I have never done this before and I'm an average small investor like you guys. I make mistakes.

As far as using volatility to the upside only? I would disagree on that one. I think I have made a very strong case on the hardest aspect to covered call writing which is how to keep your shirt when the stock makes a nose dive. My USRX example where I explain the the stock has lost 20 points and I'm still breaking even by lowering my net cost basis. Remember, (dippity do) cover your calls at 75-80% of the original premy value and sell more calls by going out two months and at lower strike price and you have fresh dollars to cushion a further drop.

Thanks for your keen eyes. Hey, people actually read this stuff.......
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