Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Dan Duchardt who wrote (1279)	6/30/2001 8:32:26 PM
From: Uncle Frank	Respond to of 5205

>> A few experiences of having a stock move 20% to 30% in a few days after you have captured a 5% or less time premium for a near term call tends to make the longer term options a lot more attractive. I've been there, thanks to Mr. Greenspan's surprise attack in May. It was indeed an awkward situation. >> Under a certain set of circumstances, you are right that near term calls afford the best payoff. IMHO those circumstances are when you write near ATM calls and the stock does not move very fast of very far from month to month so that the time premium is a dominant fraction of the overall gain (or loss). In other words, it is best for low volatility stocks. Strategies should differ based on circumstances and your vision. Most of my stock is held in a sheltered account, which strongly influences my approach. I'm not concerned about my stocks "running away" since, as one writer put it, I feel we are bounded by the fed on the low side and earnings on the upper side. Consequently I'm comfortable writing front month slightly otm cc's against my very volatile long term core holdings when I feel they are in the upper portion of their ranges. If they get called, I'm delighted at the short term return, and will restock my shelves when they retrace. If they don't get called, I'm better off for having taken the premium. Thanks for your series of interesting and perceptive posts. I look forward to your ongoing participation in the cc4d forum. duf