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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: Dan Duchardt who wrote (13343)	10/17/2000 1:48:29 PM
From: Wyätt Gwyön	Respond to of 14162

Dan, I guess the only thing I might do differently is to take a smaller gain to unwind the position if the price were to rise well above 25 in the next several months I agree with you there, and I should have mentioned that possibility. One could establish a benchmark return, such as the risk-free rate of return. If the remaining time premium is still substantially greater than that rate, one can justify holding. Taking the case of MCDT, w/underlying at 85, I established a position with net debit of 69.25, capped at 100 in APR. Stock is already up more than 37% from my purchase last week, so is it time to close? Here is the way to figure (figures not exact cuz MCDT seems to be tanking now :): +117 (credit for MCDT sale) -35.25 (buy to close APR 100 call) --------------------- +81.75 net credit -69.25 basis (original net debit) _____________ 12.5 profit divided by 69.25 basis = 18% profit in one week HOWEVER, if held till expiry, potential remains for +18.25 more points upside, or more than half the profit potential left on the table by closing now. VERDICT: I'll keep holding.