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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: RFH who wrote (8225)	8/15/1999 9:35:00 PM
From: B. J. Barron	Read Replies (1) \| Respond to of 18928

Robert...i enjoy your site...great work and lots of info to encourage us newbees...regarding writing covered calls...i spent 1q98 studying the strategy and next 6 to 7 month writing them on a portfolio of dow dogs that i have run for past 5 years...my impression was that it is a good way to increase st income from the premiums you get...an often was able to buy back at fraction when stock declined and rewrite another sometimes as quick as 3 weeks...but in the end every stock in portf finally got called...which messes up any long term strategy unless you are willing to buy the stock back as soon as you get call...i found this psych. hard to do...also if the stock really declines after you have written call the downside protection from prem is not very much...so you have to be patient with some down and out stocks or keep writing calls and try a repair scheme...i would think it would not add much to an aim strategy and could really mess up the lt return...now as a stand alone strategy for steady income and small amounts of st cap gains it can be done...bj

To: RFH who wrote (8225)	8/16/1999 11:22:00 AM
From: JZGalt	Respond to of 18928

Robert, IMO, I would skip the covered call strategy. I think you would just end up screwing up the AUTOMATIC part of AIM. By handcuffing yourself to the committment of the shares by selling the call, you leave yourself wide open to the stock running up or down and messing up a perfectly good plan to AIM the stock. The other caveat is that even with 100 share trades, the commissions are going to eat you alive on the stocks you own under $50. Trading near a strike price and near the expiration date to avoid the handcuffing as described above, would yield low returns after commissions. The only way I would use options with AIM is to sell covered calls and sell a corresponding number of puts at the prices AIM would have you make the purchases at anyway. Obviously you might have a different risk tolerance. For instance in your JBL account if your next sale was to be at $45 and your next buy was to be at $35, then consider selling some $45 calls and also selling some $35 puts on options that are far from expiration. Be very careful using any option. A friend of mine likened buying stocks to whittling with a sharp pocket knife, but buying options like using a chainsaw. In the first case you might cut your hand. In the second case you might lose your arm. ---- Dave

To: RFH who wrote (8225)	8/20/1999 1:38:00 PM
From: OldAIMGuy	Read Replies (1) \| Respond to of 18928

Hi Rob, I'll have to compose some information on selling covered calls with AIM. Here's the quick version: - Wait until your cash reserves are close to fully funded - One CALL Contract is equal to 100 shares of the common. - If the market is getting near a peak (it would be if the cash reserve is fat) there's usually a nice premium for selling covered calls. - Remember that you will ONLY sell as many call contracts as AIM tells you to sell at that same price. If you own 1000 shares and AIM says to sell 100 at $25, then sell ONE contract for the $25 strike price. - Remember that commissions are high for option contracts. Usually it will cost you $40-$50 even if you are selling just one contract. - Because commissions are relatively high on options, be sure you are getting paid enough to justify the deal. I generally look for $1.50 minimum as the premium. That gives me the $0.40 for commissions and leaves me enough to go out for dinner! Best regards, Tom