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

To: MetalTrader who wrote (75)	4/20/2001 3:00:20 AM
From: kas1	Read Replies (2) \| Respond to of 5205

Thanks for posting the link! Not sure what you mean by reducing risk to near zero. I think Black-Scholes is useful for looking at dC/dT and especially d2C/dT2 -- that is, how the time premium burns off. I'm still looking for a site that shows a graph of C versus T (all else held constant). Black-Scholes trivia: as the story goes, Black-Scholes and the handheld calculator were invented at about the same time, and one could not have become popular without the other. However, I disagree with your characterization with what the site says about covered calls. You say: You will see it reveals options to be a losing game, but not with regard to covered calls. But the site says: In spite of many claims, covered calls do not produce an expectation of profits for the seller. In fact, it requires considerable optimism to create scenarios in which there are any significant (amount of) expectations at all, and generally there is a very small loss expected for strikes above spot. I conclude that most covered calls have expectation characteristics similar to gambling in a casino which keeps a small, fair edge for the house.