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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: NateC who wrote (13674)	4/9/2001 9:14:44 PM
From: Herm	Read Replies (1) \| Respond to of 14162

Hello Nate and Fellow Lurkers Out There! I recall some of our last email conversation Nate a few months ago, Nate! The markets have continued to drop since then. >I'm not lurking as often as I used to......but I wanted to >ask you something. I've continued with long LEAPS calls >and short the next months CC in several stocks over >the "down period" of the past 12 months. Some of these >positions have not done well as you know. Yes, I understand the difficulty of holding long CALL LEAPs and trying to write spreads one month out in a downward bias market conditions. It reinforces several rules to keep in the back of your mind: 1. Covered calls and/or LEAPs CALLs spreads are only suggested in an upward bias market phase for the underlying parent stock. Up and down cycles while in an upward mode is one thing, but, outright distribution or markdown phases are killers. 2. If you are caught with a LEAPs (stock) that dumps on you you must profit your capital. Either close at a slight loss and move on or play the LEAPs PUTs on the same investment. 3. If you are not ready or willing to implement defensive measures such as buying PUTs or writing deep into the money and as far out as possible spreads, then you should cut your losses fast. >I still expect flat to downside markets for a few months. >I haven't done any calendar spreads with PUTS...as you >discuss at your WINS site (just been a bit wimpy I guess). >Have your disciples done well with this strategy over the >past year?...or have they been burned because their >downstrike short PUT has come up for exercise....and it's >cost them more than the increase in value of the Long >LEAPS call?? e.g. in short...how have Bear Put LEAPS >Calendar Spreads worked out over this period?? Before, I begin my answer, let me caution all the readers! NEVER attempt these investments until you study and paper trade them until you get the total feel for the dynamics. With that said, let me begin. 1. You and everyone else reading this are welcome to sign up for the three week freebie of a slightly modified LEAPs Spreads Reports. www.coveredcallswins.com I do have a slim version of the learning module in the trial web site. You can get 80% of the background information needed to grasp LEAPs Spreads. 2. My subscribers have done damm good IF THEY played those PUTs LEAPs Spreads over the past 6 months. I looked at the late Jan. 2001 to Feb. 2001 LEAPs Spreads Reports which you can do since I keep a few months worth of data you can check and there have been some hot ones. For example: RAL - The stock was at $30.81 and the LEAPs PUTs were at $4. The stock finally took a nose dive to $17.69 and those LEAPs PUTs shot up to $11 in less than two months. Now, paying $400 to control 100 shares ($3,081)is one heck of a advantage and less risk than +$3,000 on the line owning the the stock straight! ICIX stock was at $74.31 with screaming high RSI and OBV. Bamm, ICIX falls off the cliff to $5.16. You have to be pretty bad not to have made money off this LEAPs PUTs which started out at $14.50 and exceeded $35. JNJ stock was at $92 and it dumped to $70. Again, LEAPs PUTs did very well. This was a conservative one! GE stock was at $52.50 and it got down to $41.00 a few times so far. Yes, this would be one to write a LEAPS PUTs spread now after the initial capital appreciation on the LEAPs. It is gravy now. HWP was a woppin $60.11 and out came the report and the stock went bye-bye straight to $28.00. PCS made my heart thump when it went from $65 to $18.00. Now, that was a thrill. Folks are too hung up on only doing CALLs. Virgil's list recently are some golden ones that will eventually dump. The technicals and fundamentals are much tool high and overpriced. Here is the answer to your question Nate! You don't have to necessarily write the LEAPs PUTs Spreads. You can simply leg into the LEAPS PUTs first and wait it out until it bottoms. Stocks go down much faster than they rise. There fore the LEAPS PUTs should not be held onto as long. Yes, buy them to add more margin of safety to your advantage. Here is the next module update I'm completing this week and I will introduce in the next newsletter. These are the 10 best bearish formations. I will teaching folks how to indentify them by using a picture to compare against your potential stock you are checking out! I have the 10 BULLISH formation as well to present. Note the average decline and most likely decline %. Remember, we are talking about PUTs and shorting stocks that are dumping! TOP 10 BEARISH FORMATIONS WITH HIGHEST MOST LIKELY DECLINE! CHART FORMATION FAILURES % AVG. DECLINE LIKELY DECLINE% 1. Pennant, trend down 34% 17% 25% 2. Scallops, Descending 3% 24% 20% 3. Head-and-Shoulders, Tops, Complex 8% 27% 20% 4. Diamond Tops 25% 21% 20% 5. Broadening Wedges, Descending, 41% 24% 20% 6. Rectangle Tops, Down Breakout 0% 20% 20%7. Broadening Bottoms, Down Breakout 6% 27% 17.5% 8. Bump-and-Run Reversal Tops 19% 24% 17.5% 9. Broadening Tops, Down breakout 4% 23% 15% 10. Triangles, Descending 4% 19% 15%