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

To: FaultLine who wrote (1166)	6/21/2001 5:08:41 PM
From: Dr. Id	Respond to of 5205

Also sold CSCO (17.80) JUL 20 for 70 cents. If called: (20 - 17.80) + 0.70 = 2.90 -> 16% ROI (OK, good) If unchanged: Keep the 70 cents and the stock -> 4% ROI Break even: 17.80 - 0.70 - 17.10 -> 4% (nil) So that was you! I was thinking of the same play, but decided that I didn't want to take less than 85 cents for them... Dr.Id@goodluck...hopeitcontinuesgoingsideways.pov

To: FaultLine who wrote (1166)	6/21/2001 6:00:23 PM
From: bobkansas	Read Replies (2) \| Respond to of 5205

I wanted to suggest that some of you writing covered calls for income rather than using them for extra income on long term buy and hold gorilla stocks...might consider use of option credit spreads...such is a form of covered call writing without the big downside risk of owning the stock. I wrote a credit spread on GX a few weeks ago and would have been killed if I had owned the stock. Instead my loss is limited to the difference between the two strike prices less the net credit in premium that I received. Losing 80 percent on an underlying stock takes a 800 percent return to get even. Why get killed on the underlying when the return on the covered call itself is not that great? Owning a stock and covering it is a sure way over time of keeping your losers and losing your winners...unless you are willing to put more money into the winners and thus increasing your exposure on the underlying so whenever it tanks you then lose more. If you are interested in using them on calls or puts (puts if bullish on the underlying stock, calls if bearish...sounds backwards but is not) go to Google.com and put in the words: options, credit spreads ...see what comes up or look at one of the many option web sites around on the net. I have written several hundreds of covered calls over the past 15 months and changing to the use of credit spreads as a less risky form of covered call writing certainly allows one to sleep much easier at night. You know your downside risk going into the trade. You do give up some of your premium to purchase a further out of the money option but it is sure worth it in my experience. Best regards to all, Bob Martin