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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Sam2482 who wrote (13724)	6/22/2001 11:23:33 PM
From: David L. Hoevener	Read Replies (1) \| Respond to of 14162

Vicki, Your plan is perfect. I have been doing the same with QQQ. I prefer to be a seller rather than a buyer of options. David

To: Sam2482 who wrote (13724)	6/23/2001 12:11:45 AM
From: David L. Hoevener	Read Replies (1) \| Respond to of 14162

Vicki, Try your strategy with IWOV or MUSE. The ROI is greater than NEWP at this time. David

To: Sam2482 who wrote (13724)	6/24/2001 10:29:25 AM
From: Dan Duchardt	Read Replies (1) \| Respond to of 14162

Vicki Any comments?? CCs from slightly ITM to OTM are an excellent strategy in an uptrend market. Pull backs are generally not too severe, and the cost of downside protection is worth it for those healthy 10%+ monthly returns. But in this case, and at this time my perhaps minority opinion is that you are playing with fire. The NEWP daily chart may look fairly optimistic for a double bottom bounce here, but it's far from being a sure thing. If it falls below 21, your net investment of $20.30 could evaporate very quickly. Take a look at CIEN over the last couple of weeks. Imagine if you had bought CIEN at $60 in early June when it looked to be bouncing and sold a JUL55 call for about $10. That may have looked safe at the time, and it might still turn out alright, but it would have been might sickening when CIEN hit $35. In your proposed scenario, you will collect $2.20 of time premium ($1.50 intrinsic value) on a stock that has a proven track record of moving $10 to $20 in the space of 5 to 10 days. Limiting your upside to about 10% and gaining protection against a 15% decline on a stock that could easily go up or down 30 or 40% in the next few weeks does not sound like a bargain to me. Further limiting your upside by selling the OTM call and buying the put may not seem all that attractive, but the upside potential is hardly diminished and the downside is improved tremendously. If you don't want to buy the put, consider a half position of uncovered stock. You collect no time premium, but your potential for big upside gains and protection against big declines is better than the CC alone. The CC is better only if things don't move too far. Dan