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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: Tom K. who wrote (12098)	12/23/1999 12:51:00 PM
From: Jonathan Thomas	Read Replies (1) \| Respond to of 14162

Tom, Herm, Thanks for the questions and the great answers on the put selling. I recently have add this into my CC "toolbox" as a means to generate income without necessarily buying stocks. I use the WINS approach, listen to some comments on stocks on this forum, and do my own research when picking stocks, but for me the process is about identical to CCing. For instance, last week Herm brought up KM as an option due to its low BB, RSI, OBV, and all the long term indicators pointed to it having bottomed out. So, normally I would have bought about 2000 shares (after doing my own research, maybe asking some questions here about the stock as well) when it sat at the 11.50 or so price point, and waited for it to cross 12.50, and/or when short term RSI/BB/OBV got on the high end, then sold at or slightly ITM calls 1-2 months (sometimes 3) out. Instead, I chose to sell 20 JAN 12.50 puts, taking my 1.50 off the table. Now, I have that extra 3k in my account for the next month, and the 23k I would have had to pony to buy the stock, all earning interest until expiry. KM is a stock I wouldn't mind owning and CCing long term, so the criteria is the same for CCing. The bottom line is that at the point I would usually buy the stock, instead I sell the put. This generates a little more cushion for price movement, and allows me to maintain an interest earning cash balance in the mean time. In Jan. I will either close the position out with some profit, or let the stock be put to me. At this point I will then try to CC the stock as normal. BUT, the good news is that if the stock is at 12.50 in JAN, I can just keep the 3k, write another round on the stock next month, or move on. Very similar to CCing, with a slightly different angle. I believe there is actually less risk this way, although it is very comparable to CCing risk. Ryan

To: Tom K. who wrote (12098)	12/23/1999 9:22:00 PM
From: Tim Lumley	Read Replies (1) \| Respond to of 14162

Tom, A very interesting and informative post. One question regarding your ROI calculation: "...My approach calls for a minimum of 30% annualized on my base* each month. ..."* Do you define your base as your total exposure in the trade, i.e. 100% of the value of the underlying equity, or do you define it to be the 20% of the underlying equity margin requirement for a naked put? Thanks Tim Lumley ps I concur with your assessment of Brown & Company

To: Tom K. who wrote (12098)	12/24/1999 9:09:00 AM
From: Herm	Read Replies (1) \| Respond to of 14162

Thanks Tom! An interesting eye opener for me. It fits so well into the WINs approach as another piece to the puzzle. 1. From a time line perspective, selling naked PUTs when the BB, RSI, and OBV are rock bottom on a beaten down strong fundamentally sound company is a prefect entry into the stock. It does offer up front cash before a potential purchase either by pre-mediated intent or being PUT to. 2. Since, I prefer to write CCs at the RSI, BB, and OBV peaks rather than at normal (traditional book readings) lower levels, naked PUTs trades would not interfere with the CCing part of the WINs cycle. Perfect flip side income generating moves without factoring in any capital appreciation with long term hold stocks. It gives you something to do while you wait for the stock to appreciate. 3. It takes less work to apply either the PUT or CCs since you are following the stock trading patterns closely. Unlike jumping around from one stock to another. That can eat up quite a bit of time. Tom! Is there anything dealing with tax losses or quirks. I would imagine if the same stock is PUT to you twice with the tax time span and PUT strike, that would be considered a wash sale? Are there any other traps? I will have to add a new chapter to WINs from your info. It sounds like one would need a good size portfolio in order to take advantage of this type of investment strategy. What do you recommend as the least amount of working capital? Thanks for your time!!!

To: Tom K. who wrote (12098)	1/3/2000 7:05:00 PM
From: Jeffry K. Smith	Read Replies (2) \| Respond to of 14162

Tom, I found your detailed answer very, very interesting. I am new to this thread and trying to catch up. PUTS are something I would like to get more of a feel for, and how to play them. One question about your answer - you said "I'll watch the BB's and RSI and attempt to sell when near the bottom band and lower half RSI..... but read that as a guide, not a hard rule." - what is "BB" and what is "RSI" and where might I find somewhere to view these things to get a feel for what you are talking about? Thanks very kindly, Jeff Smith