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

To: Sig who wrote (996)	6/11/2001 9:37:53 PM
From: William	Read Replies (1) \| Respond to of 5205

Sig - I'll try to answer your questions the best I can, but I'm having a little problem. I looked at AMEX and CBOE, as well as my E*TRADE account quotes and I don't see any LEAPS for STOR. I will guess based on the price that maybe you are referring to the OUSKDs, the Nov '01 20's. Now, what is wrong with your 40% profit? Not much, I would think. What are you missing? Well, as seen by the recent action in NUFO, the stock could drop 50% after writing the call. I almost did a buy/write on NUFO June 15's, but lucked out on this and never did the buy. Anyway, NUFO tanked and the buy/write is deep in the red. I do own a couple other stocks that the stock price fell quickly while I sat with covered calls. It will be a long time before those are green, if ever. The other problem I see with writing leaps or other 4 to 9 month calls is that the stock could go way up past the strike price and you are caught holding the stock at no additional profit for months, kicking yourself for having written the calls. It appears STOR started trading in July '00 around $112 and topped somewhere $150. I would hate to be sitting with a Nov 20 call if this puppy rebounded to $95 in October. This is one reason why I write close in calls. 6 weeks is long for me. A few times in the last year I wrote calls during the last week of trading, even the last day, and made a profit on them all. Would I buy back the calls now at a 30% profit? Yes, I would. But I would not have written leaps or Novembers to start with. Usually when I buy back the calls the stocks expire worthless anyway, so the only reason I do buy them back is to write the next month out. I have done this with QCOM several times with good results. I wrote June 75's the day after the May's expired and have tried to buy them back but with no luck. No one wanted the tiny price I was willing to pay for them, so I will let them expire Friday. As Uncle Frank states in 1008, you get better returns writing 2 front months then writing a two month. You could write six front month calls, with a much higher return. Take a look at the various options available to you, read this thread and ask some Questions (dumb ones welcome), and you should do OK. Good luck. William