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

To: M. C. Orme who wrote (388)	5/2/2001 12:48:19 PM
From: BDR	Respond to of 5205

Your post points out the importance of your comfort level with the stock in question and with the possible outcomes of either being called out or not. Looks like you have a some good trades there. GMST has always has hefty premiums. I already own some RMBS. The premiums are rich and I didn't want to own a lot more unless it was at an even lower price, given the volatility of the stock. Therefore I sold ITM calls on my new purchases today. I bought RMBS for 16.15 and sold the June 15 Calls for 3.90. Return if called away 21.8% in 44 days, downside protection 22.9%. The returns represent the higher risk nature of the trade. Not for everyone and not for a large part of anyone's portfolio.

To: M. C. Orme who wrote (388)	5/2/2001 1:45:07 PM
From: FaultLine	Read Replies (1) \| Respond to of 5205

dcmo, thanks for that info. The willingness our posters to explain their transactions and reasoning in a pedantic manner (NOT a knock <g>) has made it a lot easier for everyone to appreciate how straightforward and yes, even conservative, writing covered calls really is. I thought about waiting to see if they would rise before covering (GREED!) but then decided the appeal of this strategy to me is I don't have to watch, wait and be prone to second guessing. I know what is generated and I can let it ride unless it drops past my breakeven. I feel exactly the same. But just for the sake of discussion, what does "unless it drops past my breakeven" mean? --dfl PS dmco is too close to docomo!