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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: Dan Duchardt who wrote (11882)	11/22/1999 11:31:00 PM
From: tuck	Read Replies (3) \| Respond to of 14162

Hiya Dan, I can relate. Maybe you lurk the PAIR thread. I post there once in a great while, though most of the threadsters there are far more knowledgeable about the business than I. Still, they should be getting happy to see me: I've played PAIR twice this year, and both times I wrote calls after a little move for ~15%/month gains. The stock kept going in both instances. Most recently got called out of my November play there. Anyway, it's good to see you're doing OK, too. Most instructive for me during my recent plays was Compaq. I tried to bottom fish it. I averaged down from 22 into the high teens until it became too large a part of my portfolio, such that I had to stop at an average cost of 20 7/16. I wrote calls out of nervousness when it was just below twenty a few weeks ago. I went out to next April, and considered it a repair for a 7% gain in six months. As you may know, CPQ has rebounded strongly. But that actually gave me an opportunity to improve my position, at a slight increase in risk. Because the stock had risen so much, and because the delta is never 1, about 1 point of time premium had eroded from the calls when it hit 27 a few days ago, which looked like a short-term top per the technical analysis part of the WINS system. So I rolled to the December 25s, capturing that one point. I did so with a spread, of course, to eliminate the executional risk that plagued me when I rolled up on EDFY in separate transactions. You may remember my play-by-play at this time, posted here. What a viper! I swore I wouldn't put myself through THAT again. Not good for the blood pressure. Now I'm looking at more like 10% in two months. Much more like it. If I can find a short term bottom before expiration, I might buy half of them back and see if it goes back up. Then I'd be very happy and proud of myself. It's already back to the mid-25s. So the lesson is, if a covered stock runs away from you quickly, but looks toppy, consider the roll up. Roll to calls that are fairly deep ITM to minimize the risk normally associated with rolling up. Don't try to get it back all at once (greedy). Usually, I've found it better to be exercised, but I think this situation is an exception. In hindsight, I could also have done this with PAIR, and even IMCL, but I didn't have the gonads. Besides, I felt the need to raise cash as the market as a whole is starting to look toppy again. Comments, thread? I am also learning not to buy back all the calls when I think a stock has bottomed a ways before expiration, because the stock usually goes lower when I do that. DOH!! Oh, and Dan: you used to be a daytrader, right? Did you declare yourself a trader on your returns? I'm debating what approach to take, as this is now my living, and my portfolio had more than twenty stocks before some got called away or otherwise sold. I.E., I'm pretty active myself and I imagine I would qualify for trader status if I so chose, though the code is murky on this. PM me if your tax situation is too sensitive for public airing. PS to Herm: OK, the champagne goes to the orphanage ;~] Seriously, I think I will run out of carry forwards and have to itemize soon, so I will do as you say, and donate something almost as liquid to my favorite charity. When I do, I'll be thinking about you, if not donating it in your name. Cheers, Tuck, one of this thread's herpetologists ;~)