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

To: FaultLine who wrote (1626)	7/26/2001 12:11:36 AM
From: Thomas Tam	Read Replies (1) \| Respond to of 5205

Thanks for the advice. To summarize the recent experiment. Own SEBL and wrote the AUG 35 for $3.9 and also naked calls for Jan and Feb 50s. I had lots of feedback questioning the need to be naked calls, given the risk of a substantial run up. Part of the thinking was that SEBL was due to be range bound (which I still think). I think it was Dale or Dan that recommended covering on the hint of a turn (ala today) and I did cover the Aug 35s for $1.85. Tidy little profit for a few days of market watching. However I remain now covered for the Jan 50s and naked on the Feb 50s. In retrospect now that the market is closed, I should have covered some if not all of these calls into yesterday's close. That way I could be able to sell again the calls. I think I just watched a couple thousand in profits get chewed away. Would I recommend this strategy again, probably not in this form. I think covering the calls after a target profit has been made should be done on such calls after such a big drop as we have seen with SEBL. I think we are near the bottom of the range and the risk of lost profits (of remaining naked the calls) is higher than the potential gains from further deterioration of the premiums. Now I am going to have to wait for another dip in SEBL to regain those profits or close tomorrow the remaining calls and go naked or covered again after a little further run up to maximize returns. Later