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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: JungleCat who wrote (13492)	1/22/2001 11:48:21 AM
From: BDR	Read Replies (1) \| Respond to of 14162

Re: Deep ITM calls on MU Using the calculator here: optionstrategist.com and Fidelity's commissions schedule, I get a return of 3.21% for the covered call you describe. Not startling, but better than a MMF. I would guess that it will be a pretty safe bet and if you repeat that every month you have a 40+% annual return, beating the market indices and most professional money managers in an average year. At least that is why I would see someone doing that trade.

To: JungleCat who wrote (13492)	1/22/2001 4:17:12 PM
From: Michael Hart	Read Replies (2) \| Respond to of 14162

I use deep ITM CC's instead of shorting against the box. The scenerio for me is that I own a stock that has run up to rapidly, is overbought, has a very high RSI and has penetrated the upper BB. I believe the stock will pull back and would like to "skim" the pullback with as much short term profit as possible. Of course the risks say I may lose the stock ( of course at a very nice profit ) or if there's something happening with the company I don't know about the stock may run higher and I will not take part. To minimize the tax implications assuming I get taken out I use CC's instead of Shorting against it so I DO NOT impact the holding period on the stock when considering the stock moving to long term gain status. Other tax considerations quite often make me sell the CC into the next tax year and beyond the long term gain anniversary. This allows me to move the gains to long term status and into next year so I can use the tax portion of my profits out to April 15th, 2003 in this case. My take, Mike

To: JungleCat who wrote (13492)	1/27/2001 1:38:14 PM
From: Herm	Read Replies (2) \| Respond to of 14162

Hello Again JungleCat! Let's say for instance, MU is trading around 45 today. The feb 30 contracts are going for around 16. If I were to write 10 contracts, I would be paid $16K. But then, there's a very high probability that my shares will be called away, even if the stock dropped down to 40 before expiration. Granted, I would have made an additional 6K. Or why would I want to pay 16K to have the right to purchase the shares at a later date. You recall your example with MU? Here are some other free resources for buy call equity strategies designed to test investment scenarios at expiration. Buy Call Equity Strategy Program (Online) Download Version Available! This interactive worksheet was designed to test investment scenarios at expiration. Enter or change your position on the "Required Inputs" page to see the different outcomes of the strategy. 209.15.73.188 Use the elevator scroll tool on the right side to adjust the lower view panel depending on your screen resolution!