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

To: JohnM who wrote (840)	5/31/2001 12:12:03 AM
From: FaultLine	Read Replies (2) \| Respond to of 5205

Good evening John, I try to buy back on down days when the premiums are low just as you indicated. Conversely though, I try to sell on up days when optimism reigns and the premiums are puffed up from the positive atmosphere. I personally think now is a bad time (maybe the worst) to write a contract because the premiums have collapsed the last few days. Concerning NUVO, take a look at these quotes: options.nasdaq.com As you can see the DBEGV JUL 12.50's closed at $1.15 so I think you've slipped up somewhere. Note also the premium fell today by a buck, as you would expect from today's market activity. In short, the buy to close sounds good but I'd wait for more optimism to sell new contracts. Remember, you are trying to buy low, sell high -- just in the reverse order. --ken/fl .

To: JohnM who wrote (840)	5/31/2001 1:00:54 AM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

>> I'm considering two kinds of covered call writes for tomorrow (Thursday) and would love to have any comment anyone wishes to offer. Be careful what you ask for; it may come true <gg>. Despite Fault Line's confusion on your nufo strike price, he made a very important point. The key to front month cc writing is selling at a peak, not from a valley. If you think the nasdaq is about it dump, then your timing is just fine, but I think it may be a little early in your cc career to start covering en masse. You're making a lot of progress in grasping the concepts, but I'd suggest you do a little paper trading before you jump into the deep end of the pool. This stuff can be pretty tricky, particularly when you're covering core positions that have had appreciated since you bought them. jmho, duf

To: JohnM who wrote (840)	5/31/2001 10:04:50 PM
From: LKO	Read Replies (2) \| Respond to of 5205

My choice in each is to write close in out-of-the-money calls to get the larger premium but with some protection. My guess is that I don't run much risk of losing the shares but, since, again, I'm not writing a lot, yet; I can live with losing them. Will, in fact, just buy them right back. Any thoughts? Other have commented on your trades, I just have some views from the soapbox. <G> I think in the above comments you show some ambivalence in being ready to accept the consequences of losing the covering shares and some notion that you can "just buy them right back". This ambivalence is common, not unsual but is not an honest evaluation of the risk and you are not capturing the worst case as a possibility. We all like to have our cake and eat it too, but the market moves can be very unforgiving. <G> You cannot always "buy them right back" except with a loss on the overall investment since the price can move a lot and you can miss the stock upside before you "buy it back". And then come the losses... They key to happiness in covered calls is the low risk case when you are happy with both outcomes (selling the shares OR keeping just the premium). Others are higher risk stratgies, and perhaps some other strategy (not writing covered calls) may be more appropriate unless you are doing it just to practice the covered calls technique (and not to invest). Choose the right tool for the job (and sometimes that isn't writing covered calls). Analyze the worst case honestly before contemplating any sequence of trades. LKO