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

To: FaultLine who wrote (461)	5/7/2001 6:25:56 PM
From: alanrs	Respond to of 5205

No, I typically am willing to have my most expensive shares called at cost or a small profit. If I have 800 shares bought at $20, 30, 40, and $50, and the current price is in the 25-35 range ( a rough approx. of a lot of what I own), I would be willing to have 200 called away at $55. This is not a written in stone method, but is how I approach the problem. To accommodate this, I often have to sell more time. I tend to look for a $3-$4 premium 3 months out, or at least this is how it has worked out most often. Sometimes I can get the premium 1 month out and sometimes I can get a better premium or the same premium at a $5 higher strike, but that is just luck and timing. Edit: I do have a theory (that I can't substantiate) that I am probably not selling to some wild eyed optimist, but to someone short the stock or someone using a more complicated option strategy whereby he/she makes out ok even buying what I consider to be very expensive calls.

To: FaultLine who wrote (461)	5/8/2001 12:05:23 PM
From: alanrs	Read Replies (1) \| Respond to of 5205

I wanted to add something to the post I made yesterday regarding premiums and such. In the last month I have found very little that falls into the range I like to get. I sold one QCOM May '65 (a buy-write), and one TQNT Aug '40 in this time frame. Since I don't rely on this for income, I am still viewing this as an experiment (that I really don't have time for), with an eye to eventually reading the books recommended and actually learning what I am doing. In retrospect, it seems that making large premiums for very little time was easy the last half of last year, and large premiums for longer time periods was easy for the beginning of this year, but that the pickings are much slimmer now, even on up days for a particular stock. I can see that if one was relying on this for income, one would have to pay much more attention to closer in time frames and closer to ITM strikes. It is probably the case that I wandered into covered calls at a particularly good time and that premiums were unusually large there for a while. I didn't want to leave the impression that I had some magical way of getting $4 premiums on calls 150% over the current market price, with 3 months remaining to expiration. It was nice while it lasted though, and I will keep looking for a similar situation. ARS