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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: wbpfta who wrote (11420)	8/25/1999 10:56:00 AM
From: Jonathan Thomas	Read Replies (1) \| Respond to of 14162

First, I think you're ok with the puts. The earnings info will affect the stock before the release, as news spreads on the street. Also, you'll have those 2 days, I think you'll be ok. If it scares you that much, buy another month out, to October. The long calls are not a bad idea, but buying the Sept 45 is probably too much out of the money for the september timeframe. I would buy the 40's in September, or the 45s in October. It may not get up fast enough before your options expire. Now, lastly, I think you are making the mistake on your CC move. Selling the Jan 45 has two problems. Way too much out of the money, and way too far out. Look, you are buying long calls in case of a runup. You don't need to protect your upside anymore. Sell at or Deep in the money calls at the upper bands. You'll profit on the premies, even with the other 2 sideshows. Now, you're locked in with those profits alone, and if the stock takes off you have the long calls to either get the stock back, or take your money and move on. If the stock tanks, your puts will make it worth your while. Selling the calls you suggest could severely limit your profit, not to mention your ability to maneuver as the stock starts to move. Jan is long time to wait to only get 2 bucks on a 35 dollar stock. You'd be break even with this move, playing not to lose, instead of playing to win. Just my opinion, always willing to hear the flipside... Good luck, let us know what you decide, and how it works out. Ryan <<<<<<<<<<<< Message #11420 from wbpfta at Aug 24 1999 5:55PM Herm and Board: Protective Put choices for ORCL. Scenario: Earnings announcement date is Sep 15, 99. ACE is 0.16 EPS but whisper number is 0.32. This suggests that high expectations are built into the stock. Missing the whisper number would very likely send the stock tumbling down. Stock gapped up 25.12 to 32.90 in June 15/16 when earnings exceeded expectations. Since July, trading range is between about 32 to 39. iqc.com I own stock at 31.63. For the downside protection, I'm thinking of buying Sep30P at 7/16. However, expiry date is Sep 17, which is only 2 days after ORCL earnings announcement. For upside sideshow, thinking of buying Sep45C at 7/16. To pay for PP and upstrike call plus reduce NUT, will sell Jan45C at 2 1/4 Your comments/suggestions are most welcome. In particular would like to know if 2 days between earnings announcement and options expiry date means that the options are virtually worthless due to time decay. Also, how much would the stock price have to move before I recover the total investment of 7/8. (I estimate about 1 1/2) >>>>>>>>>>>>