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

To: William who wrote (968)	6/7/2001 9:31:46 PM
From: hivemind	Respond to of 5205

On the stock price level for writings calls against, I've seen references to lower priced stocks being "better" -- simply because there is an apparent higher proportionate premium level. The idea being if all things are equal except stock price, one might could get say 10% on a $10 stock ATM call as opposed to say, 7% on a $20 stock. So where your capital commitment is the same, one could possibly earn more from the lower priced stock. I have never looked into this myself, I report only what I've read. Myself, I don't care what price level when doing a buy-write or equivalent short put. I consider return on strike over time, but only after fundamentals are checked out satisfactorily and the stock is not too pricey. caveat emptor

To: William who wrote (968)	6/11/2001 6:50:58 AM
From: Sig	Read Replies (1) \| Respond to of 5205

William: Could I ask you a few questions based on your experience.- I'm pretty new to CC's Generally I try LTBH and so profit on CC's means I have failed but the calls would be a way to handle temporary downturns. I wrote three leaps on Stor shares for around $6.50 each and those shares cost me $17. The result is that I will have a profit of ~40% if I get called anytime in the next two years. The calls are presently at $4.50 As I understand it, I can lose only if the shares close below $10.50 The downside is I will have to keep the shares in my account to cover in case of getting called and they probably will not be marginable. 1. This is too good to be true. What am I missing on downside possibilities. ? Why don't I just buy another 300 shares and write covered leaps when it goes back up a few $$? 2. Would you buy the calls back at the present (30%) profit for a week and write them again when the stock goes back up.? A person who trades calls would probably do that for better gains, but I am mostly trying to put a bottom on possible losses. For example, if I bgt the calls back and the stock dropped from $18 to $12, I would lose- onpaper, 50% of my investment. I also hesitate to buy calls back because in the past, it was a waste of money when I three times wrote CC"s on Qcom and bought them back when they would have gone to zero anyway. In retrospect, it would have been much better to buy puts on a stock that may just continue on down. Thks in advance for any comments you can make. Sig .