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

To: Dr. Id who wrote (1298)	7/3/2001 3:22:02 PM
From: surfbaron	Respond to of 5205

Dr. ID: Though not in that crowd, I considered the move since the world was ending as Q was around 50. The reverse might play out. This news is capable of pulling a China announcement type rebound and subsequent fall due primarily to the fact that even the mighty Q can't fight the DAQ.

To: Dr. Id who wrote (1298)	7/3/2001 5:28:47 PM
From: Pat W.	Respond to of 5205

Actually, I sold July 50's. I did a buy-write on 6/21, paid 48.18 for the stock and got 3.80 for the CC. It may seem like a dumb$#!+ thing to do, but I did it with money earmarked for buy-writes, fully expecting to get called, and the returns are what I wanted. Have a happy and safe fourth. pat P.S. QCOM is my largest holding by far, and I have plenty enough left that I still can rejoice after today's move.

To: Dr. Id who wrote (1298)	7/3/2001 10:01:29 PM
From: FaultLine	Read Replies (4) \| Respond to of 5205

I've not had such a deeply ITM position before but it is interesting to me (in a perverse sort of way) that the claim that the farther ITM or OTM a call is, the smaller the time premium will be is supported by this QCOM move (see McMillian, Fig. 1-2, p.11). Using the QCOM JUL 55 calls I sold as an example <sigh>, QCOM was at about 57.50 the last three days, the JUL 55 calls were at 4.60. Today QCOM went to 63.90 and the calls rose to 9.40. Let's take a look at the time premium yesterday: Time Premium = JUL55 - (QCOM - strike) = 4.60 - (57.50 - 55) = 4.60 - 2.50 = 2.10 But today, the time premium collapsed to: Time Premium = JUL55 - (QCOM - strike) = 9.40 - (63.90 - 55) = 9.40 - 8.90 = 0.50 The Time Premium dropped 1.60 or about a 75% decline overnight. Now, I'm not sure what I am going to do about this situation, but with the Time Premium getting so small I do have to consider the real possibility that I may get called real soon now, so I may not have much time to decide my next move. Incidentally, the MSFT calls I bought are in the toilet too... :o( --dfl@onceagainproudlyonthetoptencontraryindicatorlist.nuts

To: Dr. Id who wrote (1298)	7/4/2001 1:52:52 AM
From: BDR	Read Replies (1) \| Respond to of 5205

<<Just curious about those that sold QCOM July 55's... What are you planning?>> I sold July 60s on all my QCOM on 6/25 and 6/27 for 1.95. July 60s are now ask 5.50 at the close today with QCOM at 63.87. That is, the intrinsic value is 3.87 and the time premium is 1.63. I am not planning anything, yet, just looking at the choices. If I let QCOM get called at expiration my effective price is 61.95 and I forego any profit above that price. Not a bad choice if I think QCOM is going to wander around a bit for a while in which case I might get back in at or below what I sold it for. If I buy the calls back now I am looking at a loss on the calls of 5.50-1.95 = -3.55. Not the end of the world. But, if I buy back the July 60s now, I am paying for 1.63 in time premium, something I would like not to do. So is it better to wait until expiration and let the time premium expire, realizing that the stock could run and I will have to buy back at a much higher price? It is also possible they could expire worthless. Anyone got a crystal ball? I could roll out to the Oct 70s, bid 6.50, for a credit of 1.00 and an increase in potential profit of 10 (strike price moves from 60 to 70). That is only $1 in call premiums for an additional 3 months in a covered call position. Not a very exciting return. Scratch that. To stay in the game in case the stock goes on a run I could buy an equal number of deep ITM calls, e.g. July 50 calls for 14.30 (time premium only .43) creating a vertical spread, or an equal number of the shares themselves (time premium 0.00). But now I have doubled my exposure in the event of a drop in the equity price. I am trying to reduce risk and portfolio volatility, not increase it. Scratch that. As you may be able to tell from my ramblings, I am very tired and I am not making much sense of this situation. I think I will go to bed and wake up July 20th. Since buying back the calls or rolling out (the leading candidates) look more enticing once the time premium goes away, I'll make a decision then.

To: Dr. Id who wrote (1298)	7/4/2001 3:45:52 PM
From: Andrew N. Cothran	Respond to of 5205

I sold the July 60's for 2.80 a week or so ago and bought them back yesterday very near the open at 3.60 and 4.00. since I have been around since the ERICY capitulation in early 1999 (and before), I knew what would happen. I did not expect NOKIA to fold so soon. I will wait now for the stock to trade in the upper 70's and low 80's before I reenter covered call positions.