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

To: Thomas Tam who wrote (1540)	7/19/2001 7:47:57 PM
From: BDR	Read Replies (1) \| Respond to of 5205

You bought 1000 SEBL and then sold a total of 40 contracts representing 4000 shares. Do you hold other shares of SEBL? Did you write 30 naked calls?

To: Thomas Tam who wrote (1540)	7/19/2001 8:16:38 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 5205

Thomas, Very complicated strategy this am I can't help asking why the complexity? The JUL35 short was clearly a profitable trade for $1.05, and you bettered your long stock basis by $.57 on the sell and rebuy, so you put some gains in your pocket. What you have left now is biased to the the downside by about 1/4 the amount the stock moves (combined calls lose value about 125% as fast as stock gains), which could be accomplished in many other ways. Was this experimenting, or is there some masterful plan at work here? Dan

To: Thomas Tam who wrote (1540)	7/23/2001 12:45:15 AM
From: BDR	Read Replies (1) \| Respond to of 5205

You have received several responses cautioning you about the dangers of covered calls. Evidently you feel confident enough about the future price movements to have taken the positions to begin with, so perhaps you cannot be persuaded to take a more cautios approach. Let me just say what I think I would do if I were to go after the OTM call premiums without having to buy the equity. As insurance against unforeseen positive events I would convert those positions to credit call spreads by buying even further OTM calls. For example: Sold 10 Aug 35 for 3.9 Buy 10 Aug 40 for 1.05. Max profit is reduced to 2.85 but the potential loss is now limited to a max of 2.15. I would sleep better, but to each his own.