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

To: Dan Duchardt who wrote (1497)	7/15/2001 10:37:46 PM
From: alanrs	Read Replies (1) \| Respond to of 5205

Dan opportunity for profit on the calls as the stock swings I'm a little light headed right now and both your and mathemagicians posts deserve more sober thought,and are both very thought provoking. In regards to buying/selling smaller positions of the underlying instead of the options, I find I am conditioned somewhat by my trading experience. In effect, I have tried doing exactly this for years,but was always frustrated by the high commission costs. If I felt the general market was ahead of itself I would attempt to cut back 10% (for example), but not being in mutual funds I always had to pick an individual stock to sell part of, and up until recently pay up to $75 for the privilege. While I was surprisingly successful at this, options and new lower commissions have solved a lot of my frustration. I am able to maintain a steady exposure to the companies I want to own, while increasing or decreasing my exposure at the margins thru the options. Now, as I have made changes affecting my commission costs (& continue to drop them effectively to zero with IB), I may have to rethink this whole thing. However, my success rate has been so high using options that I am reluctant to screw with it too much, even to the point of being in no hurry to actually fully understand what I am doing. A combination of "ignorance is bliss" and "don't fix it if it's not broken". Anyway, I must get to sleep since 5 AM comes early at my house. Thanks for the replies. I will read them more carefully soon. ARS

To: Dan Duchardt who wrote (1497)	7/18/2001 7:23:54 PM
From: alanrs	Read Replies (1) \| Respond to of 5205

Dan It is always worthwhile to compare cash backed put writing with a comparable CC position to see which works out better. I wanted to run thru what I just did today and see if I've got this right. Of course I didn't do the exercise before selling the put, but that's par for the course. Anyway, I sold the Jan 03 25 put for $580. My potential investment is then $1920, should the stock go to $25. This gives me a return of 30%. If I had bought the stock at $3500, and sold the Jan 03 35 for 1500, my investment would be $2000, and if the stock went to $25, I would be $500 ahead (the 1500 premium minus the 1000 loss on the stock), for a return of 25%. Am I missing anything? Thanks ARS