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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 Scott who wrote (11863)	11/20/1999 1:53:00 PM
From: Herm	Respond to of 14162

Hi Mike, I plotted NSM using the weekly profile and the daily profile. The weekly reading plotted a typical double-bottom which the second leg was completed in early 1999 (Mar/April) at bargain basement NSM price of around $9.00. The first major resistance point was the $20 and NSM did pull back briefly as folks cashed out. I see a stock that was primed to go up. Now, with that said, you joined the party pretty in the game coming in at $29.00 when $40 was the 52-week high. Now, NSM is about to make a new high on this attempt and the OBV and RSI is off the chart for NSM. I would be willing to say that NSM may be closer to $30 by Jan. It is bound to pull back after making this new high. After all, all those folks at that last $40 reached on OCT 1998 are going to cash out faster than you can say covered calls. For all those months they have been sitting on dead money and a paper loss. That further illustrates my reason for CCing at theb right time. If your stock is cycling downward and you are doing nothing about it, you are not making money. If you CC along the way, there is no doubt that you would make money and eventually recover the capital appreciation in the stock. CCing helps reach that breakeven faster than simply doing nothing. Mike, I would have expected a miss on the first 52-week high around Sept. 1999. The pull-back was to be expected. The second attempt I would have taken more seriously and held off CCing. I guess that rule should be written into the WINs PowerPoint presentation. You could buy long calls as sideshow and milk what you can from that as you wait for better covering prices for your existing CC. Notice the size of the drop after that last new high. It was sizeable. I would race the clock until JAN expiration if I had your hand. That time erosion on the CCs will really kick in come December.