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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: Andrew Williams who wrote (12119)	12/29/1999 12:17:00 PM
From: OX	Read Replies (1) \| Respond to of 14162

I'll reply from my own NP point-of-view... 2 things about NP: pick the right underlying and it's not a be-all-end-all strategy... as with anything, it works best in certain situations. Currently, put prems are very rich, so even being cautious due to Y2K, you can put on NP an extra strike out from where one would normally and still make good money. Let's say the DJIA drops 10% (even tho your example of 1000 pts is less than 10%) and your underlying does the same. For my current open NP, I would still be way above water, poised to make good money. A 15% hit, I'm about breakeven. These were all put on roughly 1 month to Jan expiration. When you write a NP, you have to be ok w/ owning the underlying (not that you actually have to be put to, but you have to be comfortable if it is). You can't get shaken out of your NP because prems rise (temporarily).

To: Andrew Williams who wrote (12119)	12/29/1999 4:14:00 PM
From: Tom K.	Read Replies (1) \| Respond to of 14162

....is it possible to estimate your downside exposure?... Andrew, the extreme downside is that you'd own the stocks you had PUTs on and they would be below the market value. The reality is that that is unlikely if you do it properly and manage your positions. Specifically, provide enough cushion and you can take a 10% drop in the price. Stay near term and you're even better. Diversify a little and you've got more protection. And if you've dealt only in quality issues, so what if you wind up owning MSFT or GE or CSCO. Not only will they come back, but you can sell CALLs to lower your cost basis. This is an excellent approach, but don't be naive.... it takes some work. Good luck. Tom P.S. the market is crazy today.... 3 days ago I sold 10 QCOM 320 LEAPs and today they are up $14,000.....but only on paper until I close.