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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: Michael Hart who wrote (11507)	9/9/1999 10:13:00 PM
From: Dan Duchardt	Respond to of 14162

Michael, Just looking at the numbers: Assuming a starting point when you sold the CS ABs @ 4_1/2, with CS at 12, you effectively put 7_1/2 of your money to work looking for a return of 10 in January, a gain of 2_1/2. Right now you could buy back your calls and sell the underlying for a net of 9_3/8 (buy calls at ask (8_3/8), sell stock at bid (17_3/4)), for a gain of 1_7/8 or 75% of the possible 2_1/2 in less than half the time. {{If you are brave, you might even leg out and get closer to your 2_1/2.}} Your original post sounded like you were not interested in spending money to roll up to a higher strike price, and might even want some cash out of the deal. You might consider buying back your ABs and selling some of your CS stock to raise enough cash so that when you sell the higher strike calls you come out more or less flat, or with a little cash left over. That way you will avoid the big capital gain, and give yourself some room for a better return on the remaining position. What's the general rule of thumb on moving up in strike price on CC's when a stock has run up and will at least maintain the present level ? I'm not the expert, but from reading what they have to say around here (please feel free to jump in, any of you) I think the general rule is that the time to be making this decision is when the stock price reaches the level of strike price + premium collected, or in your case around 14_1/2. Rolling up 2 or 3 strike intervals back then would have been about a buck cheaper then than it is now. How far out you want to go is a matter of taste. Nearer expiration dates give opportunity for writing more rounds of CCs, while farther ones give you more time to deal with unexpected events. Strike-time combinations that give potential 10% per month returns appeal to me, and seem to be plentiful, but I'm new at this. Dan