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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: jaytee who wrote (11459)	8/28/1999 4:20:00 PM
From: Casaubon	Read Replies (1) \| Respond to of 14162

FWIW, that stock just gave a bearish signal reversal (in Point and figure charting language). This signals the end of a down trend, and the beginning of an uptrend, with a high probability of success. Furhtermore, the stock put in a long white marubozu candlestick last week, on strong volume. This is a strong bullish line, and prices often find support at the midpoint of these lines, on pullbacks. I mention this because the market may correct monday to tuesday on Alan Greenspans speech. iqc.com the chart shows %K just crossed over %D at low RSI (35), implying plenty of room to run to the up side. The MACD just had an inflection, from negative to positive, and is close to crossing the zero line (a common buy signal generator). iqc.com The monthly time scale shows the bottom bollinger band sloping positive, as the upper BB trends slightly down to sideways. As these converge, this stock could burst up, finding some horizontal resistance, first at $15, and then again around $18 and $20. Most of the open interest is in the december 15 calls, so expect strong resistance there. Good Luck! PS I'm going to follow this one. All these companies with hot commercial products geared towards kids have been very emotionally charged. Take a look at KIDE and GRIN (as was mentioned earlier).

To: jaytee who wrote (11459)	8/28/1999 6:45:00 PM
From: Casaubon	Respond to of 14162

I am interested in your viewpoint on the "illiquid market" part, especially. Would it be fair to say, that if there is a low open interest in a call as described above, to date, that there is no great opportunity there (even though the "math works" . . . and perhaps the charts, and timing as well?) illiquid does not equate with "not worth it". Generally the options plays available are based on a delta neutral strategy (my opinion). What we are trying to do is generate returns better than delta neutral positions (where ALL of the profits are generated from time decay premiums). By employing some "statiscal improvements", which is what we are doing as chart readers, there is a lot of room to capture big profits from price aberrations (as compared to a historical perspective). Since stocks can and do trade based on emotional perceptions, probably even more so than on simple fundamentals, we can look to identify these emotional outliers and profit from them. That, IMO, is what makes Herm's method so valueable. He has set forth a very reproducible systematic method for measuring aberrations in the pricing of an equity.