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

To: JohnM who wrote (758)	5/23/2001 6:30:44 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 5205

Hi, John. Where is everybody? I can't believe no one has responded to the query you posted this morning, but I'll give it a try. I think your approach on what amounts to a buy-write on nufo is well thought out. The most important thing is that you've researched the stock and want to own it. The premium looks rich, due to nufo's high beta, the return if called out is excellent, and if it dips at expiry, you'd have a nice little hedge. You presented yourself as a novice at cc writing, but you've set this play up like a pro. duf

To: JohnM who wrote (758)	5/23/2001 7:46:06 PM
From: StockHawk	Read Replies (2) \| Respond to of 5205

Found a link on the www.CoveredCalls.com site to a list of stocks with the highest premiums. Hi John, Frank already pointed out that a key aspect of your decision is the fact that you have been watching this stock and wish to buy it anyway. That's important. I believe that many people try to play the covered call game by searching out the stocks with the highest premiums. In general they are to be found on stocks trading for about $10, with a call one month out. It often seems that such stocks/writes are offering 13 to 15% a month. Unfortunately this is a dangerous game, which often plays out with several wins and then one huge loss. I believe it was Wade Cook who wrote The Wall St. Money Machine pitching this type of play. From articles I've seen, it has been claimed that he himself has not made money at it. Some will say that stop losses can protect you, and perhaps that is true, but imho the best way to play the covered call game is with the highest quality stocks, as is being done by most who post on this thread. StockHawk

To: JohnM who wrote (758)	5/23/2001 9:07:42 PM
From: BDR	Read Replies (1) \| Respond to of 5205

Re: NUFO buy/write That looks like an excellent entry point. The most important point about the trade is that you have researched the company and are willing to own the stock. If you wanted an even more conservative/defensive trade look at the June 10s. They are going for 5 which gives a return on 10.7% if unchanged (i.e. exercised) and 35% downside protection using the calculator on the McMillan site. The June 15s yield less than that if unchanged and, of course, much less downside protection. Having been burned repeatedly by RMBS (how low can it go?) lately I am very interested in downside protection with more speculative issues.