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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 (759)	5/23/2001 7:08:03 PM
From: JohnM	Respond to of 5205

You presented yourself as a novice at cc writing, but you've set this play up like a pro. Well, I wish I had some clever reply, but none come to mind staring out at the New Jersey early evening drizzle. If it's well thought out it's because the McMillan book really is quite good and because this thread has been such a helpful place. I pulled the trigger, but, as always, it was not quite as good as it looked first time around. I bought shares at $14.03 and sold the option at $1.30. There is very little money at stake this time around. Mostly just a learning exercise. I want to watch the price of options and the underlying shares over time, see what moves them. I need to understand, at least better, how options are initially priced and how their prices vary with the underlying. Then, if the market looks promising for covered call writing, start writing them with more money at stake. John

To: Uncle Frank who wrote (759)	5/24/2001 12:44:41 AM
From: Uncle Frank	Read Replies (2) \| Respond to of 5205

John, in my reply to your play on nufo, I commented that "The premium looks rich, due to nufo's high beta", and was promptly taken to task by one of the experienced options traders on the thread. He was kind enough to do it by PM so I could save face, but since have no allusions that I am anything other than a pilgrim (dummy), I have no problem in exposing my confusion in interchanging the words beta and volatility. Beta (as defined by the cboe): A measure of the volatility of a stock relative to the overall market. A beta of less than one indicates lower risk than the market; a beta of more than one indicates higher risk than the market. Nasdaq.com uses the S&P 500 as the underlying index to measure the overall market for beta. Volatility (McMillan - glossary -p871) Volatility is the measure of the stocks price movement around its own price - standard deviation to its average. Perhaps one of the wunderkind (Ethan or Mathmage) will be kind enough to offer a mathametical explanation of the difference between the two terms in practical applications. That'll teach me to use big words without knowing what they really mean. duf@meaculpa.com