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Strategies & Market Trends : The Options Box -- Ignore unavailable to you. Want to Upgrade?

To: smchan who wrote (10792)	5/11/2001 9:45:44 AM
From: Poet	Read Replies (1) \| Respond to of 10876

Hi Sam, That's a great question. There are a number of ways to trade covered calls: Write them at or above resistance to earn extra income on your shares, which you don't want called out. These are usually allowed to expire worthless, unless the stock rallies above your strike price and you want to "buy to close" and repair the position. Write them at or slightly out of the money with the intention of trading in and out of them. This is what I do. It requires more work, but it's potentially more lucrative. I'll often write a cc that's got a $3 or $4 premium and set a GTC limit order at $1 or so. The decay on calls is geometric and slows significantly once the premium reaches $1.