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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Lance Bredvold who wrote (22)	4/19/2001 6:43:48 AM
From: alanrs	Respond to of 5205

A couple of things I have learned in the last 6 months. NO market orders on options. Buy the common back if you are called and want to own the stock. Personally, I have had great success selling covered calls way out of the money with short to medium expirations and buying as much time as possible (LEAPS) when buying. I tend to buy back when satisfied with the return-typically 30% in a day or two, or 50% if held longer. I also tend to only sell a cc if I can get a strike price at which I would not be unhappy getting called. Am looking to sell cc's on TQNT, CREE, and WIND today or near future. Looking at Aug. 01 30's at strike prices around $3.50-4.00. This seems to satisfy my urge to trade. I know I'm jinxing myself by saying so, but I have yet to lose money on an option, and have generated an income roughly equal to what I make at work, while only putting a small portion of portfolio at risk (30% max), and then only part of the time (roughly 50%). I know there is a catch somewhere in this, but I haven't found it yet. Looks like the financial fountain of youth to me. Off to work. ARS

To: Lance Bredvold who wrote (22)	4/19/2001 10:54:32 AM
From: BDR	Respond to of 5205

I use Fidelity and enter most of my covered call writes online. But I do have the option of talking to a broker. I don't know about Waterhouse. If you are trying to roll out a call position you should talk to a live person and see if they will let you enter it as a spread or paired transaction, that is, buy the near term option and short the longer term option for a net transaction cost. If the expiring option is currently quoted ask $5 and the longer term option is bid $5.50 you would ask them to execute the transaction at a net credit of $.50. You don't really care whether they end up executing at 5/5.50 or 5.25/5.75. It is all the same to you. But you have to stay on top of it because if they can't get that spread they won't execute and you could get called away. As long as there is a time premium you should not get exercised but the time premium vanishes as expiration approaches so the risk of exercise increases. Also you mentioned that you hold thinly traded options which will make it very difficult to know what the time premium is. Low volume may make it difficult to do a spread as described above, too.