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

To: William who wrote (797)	5/25/2001 10:03:52 AM
From: Judith Williams	Read Replies (2) \| Respond to of 5205

in a correction, write calls--not puts I've been selling sebl puts lately--but not because we are heading for a correction. I've now given up predicting where the market is going and just focus on a couple of stocks. Thinking we were about to relax, I got called out courtesy of Greenie's surprise. Systematically selling puts allows me to buy down my entrance ticket. (April 35s were called when Sebl was 45). But the most important thing here is that I want the stock back--I would just not like to pay so much. --Judith Williams

To: William who wrote (797)	5/25/2001 11:47:25 PM
From: dday	Respond to of 5205

William and Rock, This response is to the concept I am deriving from your posts and relates to cc writing as strategy. This is my opinion only and apply it as you see fit within your own investment strategy. It is really simply an observation and comes from many years of tinkering with this option stuff. I would try to separate my 'option' thinking from my 'market' thinking. 1) Both cc writing and put selling are bullish strategies since max return is achieved by the underlying stock rising in price. 2) Both cc writing and put selling are 'income producing' strategies and not 'capital appreciation' oriented. Therefore, cc writing and put selling should be compared to other means of deriving income. In other words, results should be measured against other fixed income alternatives ( i.e treasury bonds, munis, agencies, corporates, hi-yields, money markets etc.) . Whether you feel the 'market' is in the el toro mode or Smokey the Bear doesn't really matter. In a cc, the underlying stock is simply a vehicle utilized to earn more income than one could elsewhere. It is preferable to write against stocks you feel will go up. The only way to lose on a cc (out of the money write assumed) is if the underlying goes down. I never fear a stock being called. I welcome it. It means I have maximized my profit on that position. As far as writing against long held. low basis positions (seems to be a common strategy on this thread)--nothing wrong with it at all. And if you are nimble enough to buy back and resell etc etc, by all means, I certainly would endorse that as well. But I think you should give my earlier thoughts some consideration. I also think a put writing or cc writing account should be separated (either with another separate account or at least in your recordkeeping) so you can see actual results. As always, best of luck with your trading. Regards Bob