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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: NateC who wrote (11171)	7/7/1999 10:39:00 PM
From: RDHickman	Respond to of 14162

LEAPS Assignment When you are assigned on the sold Calls at expiration: 1. Close both positions. A. Buy-back the Sold Calls (Buy to Close) (No matter what the price, realize that your LEAPS has also increased an equivalent amount.) B. Sell the LEAPS position. (Sell to Close) (Your "profit" is the difference of the spread plus the increased value of the LEAPS position PRIOR to having Sold the Conventional Call.) Note 1. A position can be called out anytime before expiration. (As long as you activate your plan "on the same day" YOU are in control. How do you know if you have been assigned? You don't. It happens after close of business. Sooooo.... perhaps, if you expect Assignment, you should consider rolling up and out (Exercise the Buy-Back and Sell a Higher Strike further out on the calendar) to be in a position to enjoy further price advances if you want to keep your LEAPS. Note 2. If you created the Covered Call position by using the Buy/Write technique the difference of the Spread will probably be the only "profit". Note 3. This situation illustrates the value of purchasing an Upstrike Call which would be producing/protecting further "profits" to your overall position. Note 4. Any Protective Put purchased would be becoming worthless. An observation: No position is in concrete. It is fluid each and every day. There is no absolute "right" thing to do. Only actions to be taken with reasonable assumptions. THEN, if the market moves as you expected you are rewarded. If the market moves against your position there are other actions to consider, if you want to maintain control. Note 5. When you established this position, one premise was---- "I am willing to Sell my ownership (of the LEAPS) for X number of $$$ (the premium). If circumstances change, I may want to alter/enhance my position." Aside: Due to the recent UP market I elected to "roll up and out" of my WMT LEAPS position. I didn't have an Upstrike Call in place. Last week $.125 would have been worth $3.50 today. PLUS, my nut wasn't covered. (Herm will be frustrated) I took a chance for a big hit expecting WMT to go nowhere in the near future. WRONG! Made some adjustments - back to even. Could'a - Would'a - Should'a Best to you, /Dick