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

To: FaultLine who wrote (93)	4/20/2001 9:44:19 PM
From: Mathemagician	Read Replies (1) \| Respond to of 5205

Excellent move, dfl! Excellent post, too. Ladies and gentlemen, dfl's post underscores the importance of writing down and completely understanding every contingency when adjusting one's CC position. Without that understanding it is impossible to make good decisions consistently. It also illustrates the importance of a very underestimated point: In order to make good investment decisions, you must be able to clearly articulate the reason you opened your position in the first place! I recommend keeping a journal of sorts where you write down each move and the reason for making it. This will help you accurately keep track of your goals (and has the added benefit of helping you keep track of your portfolio). Use the journal to help you remove emotion from your investing decisions, especially in times of heated market activity. Periodically review the journal to find the errors that you repeat and use the journal to help you correct them. Try to think of yourself as a business. No company would make any investment without thorough analysis, without accountability, or based on emotion. Neither should any individual. dM

To: FaultLine who wrote (93)	4/20/2001 10:14:39 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

That's quite a saga. I took a different path, which I'll outline for comparison purposes, and as you did, scale it in terms of 100 shares and ignore tax and commissions. 2/28: Purch. 100 sh. @ 52.75 -$5,275.00 3/1: Wrote March 65s @ 3.25 $325.00 3/9: Closed March 65s @ .3125 -$31.25 3/20: Wrote April 65s @ 3.25 $325.00 4/3: Closed April 65s @ .375 -$37.50 4/12: Wrote April 55 @ 1.85 $185.00 4/20: April 55s expired $0.00 4/21: 100 sh. called @ 55.00 $5,500.00 Return $991.25 18.80% I'd have made $1108 per hundred shares if I had held the lot and sold at today's closing price, but I wouldn't have <gg>. It's kind of a push on qcom, but in the interests of full disclosure, the comparison is brutally unfavorable when I look at the sebl and gmst shares that got called today. A few points, in summary: 1. I made money on both of those transactions as well; just not as much as I might have. 2. A surprise fed rate reduction, which was at the root of this week's improbable rise, won't happen very often. 3. With the possibility of positive momentum returning, I will not write May strikes as close in as I did this month. uf

To: FaultLine who wrote (93)	4/21/2001 10:33:02 AM
From: JGoren	Read Replies (2) \| Respond to of 5205

I really don't understand your strategy of selling deep in the money calls. I guess I am a simpleton and look at things from a LTBH perspective. I simply try to sell OTM CC's for extra income to pay down my margin debt and keep my qcom, which has a very low basis. It seems to me that when you sell deep in the money calls, the option transactions take over your investment strategy rather than focusing on the underlying stock. Yesterday, I bought back the qcom Apr 60's (darn Greenspan) at 2.95 when NASDAQ hit its daily low (qcom spiked down in a 30-minute spiked dip to hit its low at 14:48, so I missed qcom's daily low by a little more than a buck) and a huge loss and sold July 80's for 4.20. Although I missed the daily low, I still did better than waiting until the last hour. Looking for a retrenchment in the market in the next 2 or 3 weeks to exit the July's. I didn't think May's gave enough time; plus, I wanted to have a positive cash flow. I don't like having options out that long a time, so I will exit at the first opportunity that looks good. I need to figure out how to calculate valuation on calls, so I can convert a call price I would like to buy back at to a stock price and determine if that is realistic. Anyone know how to do that? Taking the example, I sold july 80's at 4.20. What stock price would it take for me to be able to buy them back at 2.20 two weeks from now, a month from now, etc. Anyone know how to calculate that? Or create a table for time, stock price and option price?