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To: dwayanu who wrote (29434)	8/18/2000 2:12:01 AM
From: Sully-	Respond to of 35685

Excellent job dwayanu! Thank you very much for those great examples. Tim

To: dwayanu who wrote (29434)	8/18/2000 6:56:33 AM
From: pinhi	Respond to of 35685

Thanks so much! eom Pinhi

To: dwayanu who wrote (29434)	8/18/2000 8:48:32 AM
From: Voltaire	Read Replies (1) \| Respond to of 35685

Hi dwayanu, One hell of a post. I just do not have the time to do this type of illustration and that is where so many of you assist the thread on CC's. Thanks again, V

To: dwayanu who wrote (29434)	8/18/2000 8:53:51 AM
From: Dealer	Read Replies (1) \| Respond to of 35685

Fantastic Dwayneu! Thank you! dealer(eom)

To: dwayanu who wrote (29434)	8/18/2000 10:14:20 AM
From: Mannie	Read Replies (1) \| Respond to of 35685

dwayanu...Thanks for that great post. You made my morning. We're on a roll here. Scott

To: dwayanu who wrote (29434)	8/18/2000 11:34:48 AM
From: rydad	Read Replies (2) \| Respond to of 35685

Dwayanu and all, I liked your analysis on the CC's. I am trying to do a similar analysis for my situation with ELON. I bought my shares, 100@ 44, 53, 67 and 300 @ 68. I have an average cost of about $61. I was trying to do a similar analysis as yours but I don't know how to estimate the future values of the Calls when I buy them back, or the future values of the calls when I re-sell again. In other words I was thinking of doing this: 1. sell 6 contracts for Sept 45 @ $2.25 2. if ELON > 45, then I'll buy back the calls (but what price do I use for my analysis?) 3. sell 6 more contracts for Sept 50 or 55 (what price do I use for this in my analysis) Is this a wise strategy? Thanks to anyone who can help.

To: dwayanu who wrote (29434)	8/18/2000 11:40:41 AM
From: walkman_99	Read Replies (1) \| Respond to of 35685

HI.dwayanu And you keep on doing the buybacks with rollups and rollouts until some month rolls around when the current option expires OTM. I just wrote a message to Tim asking him about how quickly you respond to that price movement. I have some sep 105 CREE cc's that went up $2400, while my underlying shares of CREE are up about $4200. Maybe you've already talked about this, but how important is the timing to take advantage of the difference? TIA. rzw@ccnewbie

To: dwayanu who wrote (29434)	8/18/2000 12:29:59 PM
From: Clappy	Respond to of 35685

dwayanu, Excellent illustration! Thanks for your time in effort. -Clappy

To: dwayanu who wrote (29434)	8/18/2000 3:25:22 PM
From: RocketMan	Read Replies (1) \| Respond to of 35685

A most excellent post. If I follow your example, your account balance would be a: $104,500 - tax gain if you had covered and got called b: $105,000 if you just held the stock and not covered c: $109,000 + gain from tax loss if you had rolled up and out In all cases you win, though a and b are no-brainers, and c requires watching the stock. OTOH, if the price went down $10 instead of up $10, a would be about break even in account balance, and b would be down $10k. So a is a no-brainer with downside protection, which as V says is the best reason for CCs. However, as clapton and others pointed out, if the vehicle keeps dropping, you have to uncover and rewrite to stay ahead of the game. I am beginning to understand better the risks involved, and why it makes more sense to do CCs on a conservative stock, or on QQQ, but not worry about watching the vehicle as closely. But, 2-3% per month is not bad.

To: dwayanu who wrote (29434)	8/18/2000 11:28:32 PM
From: RR	Respond to of 35685

Hi Dwayanu: Like others before me, let me say "thanks" for the post on cc strategy. While I don't use cc strategy at this time, I appreciate you taking the time to post such detailed info. Thanks. Have a great weekend. RR

To: dwayanu who wrote (29434)	8/19/2000 4:38:48 PM
From: Steve 667	Read Replies (3) \| Respond to of 35685

dwayanu, A friend of mine e-mailed me your post and asked me what I thought. Since you said comments welcome, I will throw in my 2 cents. My complements on a very well thought out post. I must say that looking at it gave me pause. However, when evaluating option strategies I think it is more important to keep track of Portfolio Equity than Portfolio Value. Here is why. Quick example: If I own 1000 shares of a $50 stock (assuming no margin) my portfolio value and my portfolio equity are equal at 50,000. If I then purchase 500 more shares of that stock on margin, my Portfolio Equity is still 50,000, but my Portfolio Value is 75,000, an increase of 50% without any change in stock price. No profit has been made here. So increase in Portfolio Value is a feel good figure. So using your NTAP example: $95,000 = initial portfolio equity After NTAP goes from 95 to 105, your portfolio equity is: + 105,000 stock value - 6,500 loss after buy back Sept 95 call -------------- 98,500 Portfolio Equity So a 10 % rise in stock price has resulted in your portfolio equity rising 4% --------------------------- So lets assume that the stock rises to $125 per share and you do the same thing, rolling out, at Sept 115 and 125 calls. For simplicity lets assume that the new options are about the same price (in reality they would be just slightly higher) Now with NTAP at $125 let's look at your portfolio equity: + 125,000 stock value - 6,500 loss after buy back Sept 95 call - 6,500 loss after buy back Sept 105 call - 6,500 loss after buy back Sept 115 call -------------------------- 105,000 Portfolio Equity So a 32% rise in stock price has resulted in an 11% gain in Portfolio Equity, where just holding the stock without doing options at all would have resulted in a gain in portfolio equity of 32%. It would seem to me that with this strategy you are kind of shooting yourself in the foot since the original reason for owning NTAP was capital appreciation. note: IF the stock price stays at 125, until the expiration of the new Sept 125, the Portfolio Equity will THEN be $115,500 (net gain in Portfolio Equity of 22%) Hey, when has a stock like NTAP stayed constant for a month? :-) Another way to look at selling a covered call is that even though you immediately take in the value of the option, you are just holding the stakes until the outcome of the bet has come been determined. You may be required to give it back and more. Until that time, thinking that you already have a profit is just an illusion. :-( Steve's Disclaimer: Real world results may differ. Hey, what the hell do I know anyway? Steve 667 ‹(•¿•)›