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To: dwayanu who wrote (29568)	8/19/2000 8:50:57 AM
From: SE	Respond to of 35685

Let's see if I understand this stuff somewhat. There certainly can be argument with the pricing I use as I am eyeballing the option end a bit based on what you have given us, but it should be in the ballpark. If we bought CREE FRI morning near the lows of the day, these are the results as I see them. Buy Outright: 100 shs for 113 = 11300 100 shs for 127 = 12700 Stock Gain: 11.02% Buy and Write the 105's. 100 shs for 113 = 11300 Wrt 105 for 17.75 = -1775* Out of Pocket 9,525 Let it be called at 10500 Net Gain is 10.23% Buy and Write the 105's and roll up and out: 100 shs for 113 = 11300 Wrt 105 for 17.75 = -1775 Buy back 105's = 2663 Rewrite 125's = -1150 Total Cash in: 11038 Stock called at 125, 12500. Gain is 13.25% (12500-11038)/11038 ----------------- * - 17.75 figured by saying 113 is mid-way between the 105 and 125 strikes so the option values of the 105 and 125 at the close (23.875+11.50)/2 = 17.75 Under any of the above scenarios, figuring I did this correctly, your monthly gain not only kicks assets, you are smoking! The buy outright should do better than a buy write where the stock kicks up that much and it did slightly better. The surprising thing to me was the third calculation where you can increase your percentage return by a couple points by rolling up. Interesting stuff indeed. -SE

To: dwayanu who wrote (29568)	8/19/2000 10:01:40 PM
From: walkman_99	Read Replies (1) \| Respond to of 35685

Dwayanu You are correct about taking anything with a grain of salt these days. But, I am a little unnerved by the same situation I faced a few months back in March when I tried writing calls on ELON. The ATM strike price was 90 and I bought some ELON and covered at 90. You might recall the stock shot up to about 105. At that point, I rolled to the 105 ATM calls. It gave me a loss on the 90's and cost me around 10k in cash to make the trade. Then, all hell broke loose as the stock proceeded to plummet to around 75. I didn't understand the need to cancel out of the stock and re-write. Instead I sold my shares at a ridiculous loss and unwound my cc from the may 105's (as Voltaire explains, I was still better off than if I had not covered), then I sat on the sidelines licking my wounds. Awhile later when the stock firmed around $60.00, I figured it had bottomed and I proceeded to sell Feb '01 puts at 60. The puts yielded around $19.50(so I'm covered to almost $40.00 if I ignore the time value of money, which I have trouble doing, but what the heck, I've got time to see the stock rebound.) Now, back to CREE. I'm probably more conservative this time around. So, I think I'll let the calls go to expiration and roll the calls at that date. If necessary, I can let the shares be called and start over. IN SUMMARY: It appears that in a rising market, it can be advantageous to roll-up or just sit tight; conversely, in an unforeseen market correction/slide, you are obliged to unwind your call (at a small cost) and re-write ATM calls based on the current price. My only concern is that in the example of ELON, you may be doing that quite a few times within a 30 day period. Is this making sense? -- Please give me some feedback on the above analysis. TIA and thanks for the nice summary in your post. rzw@boythisisharderthanitlooks.com