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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: Dave who wrote (11952)	11/29/1999 11:43:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 14162

Replace the post # in the box labeled Reply # with the number 1, then press ENTER, then have fun. i.e. you'll find it toward the upper right hand corner of this post. or if that's too difficult, just go here., Message 789665

To: Dave who wrote (11952)	12/1/1999 12:22:00 PM
From: hpeace	Read Replies (4) \| Respond to of 14162

Here's part of it : Option Strategy in Outline form Strategy is you want to own the stock and you use options to enhance your monthly income while owning the stock. You do this by selling cover calls and then stepping into a strangle of buying the call that is upstrike from your cc strike point and buying the put to protect your downside. You buy the put to protect yourself ahead of big announcements and the upstrike calls to protect against runaways when you sold your cc's You buy the upstrike call while the stock is retreating and the put while the stock is rallying. All the positions can be created at separate times. You use the stock's volatility to step into these positions. These insurance positions are difficult to execute if you are wanting to hold on to all your profit. But, unemotional investment style will let you buy those puts on a stock you love and support. These insurance puts and upstrike calls usually cost 1/8 to 5/8. Don't give up much for these. If you buy the put on a rally and the upstrike call on a retreat then there is enough negativism to reduce premiums in those positions and make it worth the insurance. Typical position is own 5000 shares and sell the 32.5 cc's for 3 then you bot the upstike call during a retreat back for 5/16 and the 30 put during a rally for 9/16. The volatility of stock allows this. By selecting a stock that you know instead of the alternative method of just searching for premiums then you have some idea what the pattern is on a stock during earning announcements. And, you know and don't have to continually find solid companies that are volatile but fundamentally sound. 1. More than anything study and start out small. Mistakes early can be common. 2. If you tend to be greedy , then stop reading here. Greed or a tendency to not be able to resist gambling are sure ways to lose everything you have quickly. 3. You must be very patient. You need to wait for the right times to trade. If you feel like you have to trade every day or miss a call and just will jump in even though you've missed it then stop here. Covered calling with step in strangles are not for you. Be Patient. 4. You need to learn. The Mcmillan book "options as a strategic investment" "options seminar book" by Scott Fullman, read books by Kolb and Anbacher. Then Trester has two books . All but Trester can be had in book stores. Trester number is 1-800-769-4572. CBOE has free video and an options toolkit for $30.00 5. I think the adage of diversifying is false. I think you want to own the stock and you like company. You diversify to the point that you think you can keep up with the company and the industry. For me that is one and I'll add another one soon. This is a company that you want to on the company's stk. anyway. Pick industries you think you can understand. I don't know allot about banking or realstate. .So I don't covered call that industry. 6. The company has to have a highly volatile stock but it is volatile for industry or external reasons not the fundamentals of the company. Compaq computer used to be a super volatile stock even though it reported record revenues and earning and broke every modern record for growth, but their stock was constantly up and down. It is best that the stock is in the 20-30-40 dollar range. Remember cc strategy rewards you by number of shares. Don't be religious here. Some stocks like to push alittle past the 50 then split so that's still a candidate. 7. You make option money every month. Pull that money out of the position. Pull that cash off the table monthly. Put it into a long-term buy and hold or t-bills. I pull mine off and donate it to charity. During the beginning while you are trying to build up to a qualifiable option position , you may want to reinvest it in the cc strategy but, I would recco to get this money off the table. If you do this then in 12-18 months your original investment is completely returned and you are investing with the market's money. I hesitate to tell you that it can happen quicker than 12-18 months. 8. Remember the books talk about a strangle and stepping in all a once. But, you are going to step in when the premium is to your benefit. The put on rally and the upstrike call on retreats. You may not get the opportunity to get all the positions.. then you just don't get then . Be patient buy when it profits you. 9. This one will be hard to do, but if you cannot pay for these then maybe you shouldn't be doing this at all. Use a real-time pager alert system. Alert is the company at 1-800-316-8932. You put in criteria and this sends you real-time alpha trades . So, may want signals when the stock moves 1/2 points or an option moves 1/4 points. And, at 30 minute intervals. (cost after you buy the pager is about $20-30 month) For your research and real-time news to your email system and real-time quotes, zacks and nelsens, options analyzer and options chain and just about anything you want. Cost about $80/mo. And you access through internet. Get a broker that has computer trades and must give you low commissions. Most discount brokers add additional discount for volume traders and online traders. This provides access to research data and graphs also. Broker should allow IRA's to cc's and pp's no upstrike calls. 10. I would say if you get to the point of doing naked positions then forget it. This strategy is you want to own good company and sell cc's and protect with upstrikes and puts sometimes when their protection is greater than their cost. So this is not an excuse to just buy puts and calls. There are several exceptions to this. A. buying puts to protect against an industry or market crash B. selling naked puts when you know the stock and you want to buy the stock at that price anyway. You need to be in cash and waiting to get back into the stock for this. If your stock gets called away then you are in cash. Selling naked put is way to get back in. C. maybe knowing enough to buy deep in the money call and executing strategy( watch it here you need to know the stock and what you are doing). 11. A thread friend name Chen has recommended a seminar that has a Market Maker do part of the teaching. Knowing how a MM thinks and acts is great. It's sort of like a magician revealing the secret tricks. This is really helpful. 12. Read 1 and 2 and 3 and 7 again