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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 (934)	6/7/2001 9:57:04 AM
From: adairm	Respond to of 5205

I'm paper trading one now. Just started on Monday. Looking great so far, but it's much, much too early to make any conclusions. I chose 4 stocks for my beginning portfolio: CSCO, QCOM, TXN, and DELL. Others I looked at (but did not choose)were EMC, INTC, CREE, and MSFT. I own all these stocks in my LTBH portfolio (except TXN), but for my paper trade, I put on new positions. I did not look at current charts. I looked at the June one strike OTM options, and looked at the yield. Actually, DELL was selling right at 25 when I looked so I 'sold' the ATM option for 90 cents. I threw that one in to the mix so I could see how selling ATM does vs. OTM. My portfolio size is projected to be $400,000 starting capital. So, I 'bought' stock in round lots approximating $100,000 of each. No more than 5000 shares of any one. Covered them (used the 'bid' price). I wanted to keep the trade sizes relatively large in order to keep the commissions low. I have a spreadsheet where I can input the numbers and it calculates the yields, return if called, etc., and I can update it with the current price and it tells me if each trade is profitable, or it turns red to indicate that the price of the stock has fallen below the break-even point. As of last night, all positions were profitable, and all but QCOM would be called away. (Which is just fine with me!) One of the things I hope to get from this thread are ideas for stocks to CC. I like to write front month and one strike OTM. I have almost always been successful whenever I have written CC's, but I have never done it using a planned strategy. I would do it on a whim or a hunch. I found that I would fret over getting called out because I was playing high flyers to get the large premiums. I now want to implement a systematic lower stress strategy that will give me a reasonable return. I know you've been living on your investments for while now, and I'm pleased that you're successfully doing the CC thing. I don't want to 'trade' calls when CCing. Been there, done that. I'd like to set the positions once a month, and forget 'em! (I know I can't do that, that's why I've set up the spreadsheet to track them. Hopefully, if one goes sour, I can close the position before it gets too ugly.) Any advice, words of wisdom, "speaking from experience", etc. are greatly appreciated! Best, Adairm

To: Uncle Frank who wrote (934)	6/7/2001 12:56:11 PM
From: assetlogic	Read Replies (5) \| Respond to of 5205

I am just getting my feet wet on this covered call stuff. I did a few (ok maybe one)last year and recently decided to try again. I haven't read any of the recommended books yet, but hope to at least order McMillan soon. The one thing that really gets me though, is the relatively high commissions. I can only do a contract or two on the stocks that I am interested in writing calls on. To write calls then cover is a killer in transaction costs (I think Schwab is charging me $30 -$35 a trade). As a result, I could have covered a couple of days ago, but didn't and now I run the risk of being called. I guess the thing to do is be able to create larger long positions so i can write more contracts.