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

To: Uncle Frank who wrote (524)	5/10/2001 5:09:00 PM
From: Sully-	Respond to of 5205

Actually duf, I'm immensely enjoying the ongoing discussions here. I certainly appreciate the diversity of opinion. It's given me some ideas for my CC writing strategies. FWIW, in the past, I've taken a different approach to my tax sheltered & taxable accounts. However, due to the current discussion, I may be adjusting that thought process somewhat. It seems that tax consequences should be part of the decision process, but current price, TA, FA & market direction should be weighted more heavily. In the end it's all about ROI right? I look forward to more thoughts on this area of CC writing. Ö¿Ö

To: Uncle Frank who wrote (524)	5/10/2001 5:37:54 PM
From: J F Allen	Respond to of 5205

I am retired (7 years) and live off of covered calls in my IRA accounts. Everything that I am commenting on relates only to non-taxable accounts. I follow Voltaire's approach of non-stressful activity and sell cc's for income only, not as a hedge in a declining market. I sell only OTM front month calls, 10 contracts minimum. I do use technical analysis (rudimentary) Bolinger Bands and trend lines to time my sales.I have been able to generate 2X my living expenses with this activity. I have learned the following lesson. Do not sell a cc at a strike that you are unwilling to let the stock go. Repair is expensive and not always possible. I lost 1/4 of my QCOM position last year and felt bad for a while. (I now feel a lot better) I have 10 stocks in my portfolio -G&K type- and if I get one called away I simply replace it in kind. I am in the money with my EMC shares now but if they are called I will replace them with NTAP or another stock I would like to own or buy them on the next dip again if it happens. If the premiums are good on the NTAP I would probably do a buy/write, again front month. My goal is always cash income. This month I sold May cc's on INTC, CREE, JDSU,QCOM (70 and 75), TXN, EMC and CSCO. Sold all on spikes on the NASDQ April 18th. Without immense effort I am able to generate 30% returns annually on the value of my portfolio. I again caution that one should not do this without having read and understood McMillan and would additionally recommend that anyone paper trade for several months before actually selling. Frequently after I make a sale on a spike the stock drops and I will buy to close and resell cc's at a lower strike. I ignore the basis for all of these transactions. (the basis for my INTC is less than $1.00)