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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: Mike T. who wrote (11555)	9/20/1999 1:16:00 AM
From: Dan Duchardt	Read Replies (3) \| Respond to of 14162

Mike, Thanks for sharing your thinking. I can't argue with your results, and hope to get good enough at this to realize comparable returns. I'm probably still reeling a bit from one that got away on me because I was looking for a little pull back that never came. I actually bought back some Oct12_1/2s on PAIR (flat) and later sold Sep10s when PAIR had pulled back from 10_15/16 to under 10_1/2 one day last week. I was feeling really good about it when prints were going off at 10_1/8. I figured PAIR had peaked and would end the week at just about 10; I wouldn't have minded getting called out even if it went to 11. If I managed to not get called out I could sell the 12_1/2s again next week. Three hours after I did that, PIAR was at 13. I got too cute for my own good on that one, but of course it was an exception that will not happen very often. If you are unable, or not inclined to follow the market closely, then I can see why you would do the call writing in preference to trading the stock. As I surmised in my earlier post, you are thinking a substantial near term pullback is more likely than a further advance, so the lower strike is certainly appropriate. As for Nate's observation that selling 5s might be in order, I see that as being nearly equivalent to my notion of selling the underlying stock. The delta on the 5s will remain at almost 100%, even if IFMX pulls back to the 7 range. If you can catch the bottom, you can buy back the 5s and be in position for another write just as well as if you had sold and bought the stock. The only downside I see with that approach is paying a bit more in commissions, and losing a bit more on the spread. That might well be worth it if selling stock is undesirable for some reason such as taxes. I don't have any of those problems yet. Dan