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

To: rydad who wrote (1812)	8/6/2001 3:09:28 PM
From: Dr. Id	Respond to of 5205

I know this is basic Covered Call Writing 101, but I want to make sure there is no flaw in my reasoning. Thanks all. I'm not familiar with the particular stock, but the reasoning seems sound. If it's called away, you'll have a tax loss and the $450 will be factored into that amount (I assume it's been held long term?) 25.90 is your break even point. If you feel that it's unlikely to go higher in the near term, the call sale is a reasonable play. dDI

To: rydad who wrote (1812)	8/6/2001 4:15:52 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 5205

rydad, I only lose if it goes way past $26. But I feel the chances of that happening by August expiration are slim (imo). And I realize that is the BIG IF. Your reasoning is correct. The only thing I would change is to delete the word "way" If NEWP goes past $26 and stays there, you have lost opportunity. Consider that in the last several days NEWP has ranged from about 20 to about 26, and ask yourself if collecting an additional .90 per share if it closes below 25 is worth the risk of it closing higher, or the risk of missing a better premium farther out if it closes well below 25. At least take a look at September and November 25s before you decide. One of the very first calls I ever wrote was on a stock selling for about 9.80 a couple of days before expiration. The 10 calls were selling for .50 I had owned the stock for a long time, it was well off it's highs, and it had tried to break 10 and failed at least three times over the course of several months, so I figured why not? Literally within minutes after I sold the calls the stock broke through 10, and by expiration it was about 13. True story. It got me to look a little farther out before selling anything. Dan

To: rydad who wrote (1812)	8/6/2001 10:31:05 PM
From: FaultLine	Respond to of 5205

Hello rydad, Welcome to cc4d. We're pleased to have you aboard. I see the "smart" dummies (the one's with the shorter pointy hats) have already responded to your query. Make yourself at home -- please do take a look at the header to get a sense of what we are about. I see you are a propeller head like me (in my former life). It also looks like you are a Bruin athletic supporter <snicker> as is our friend Dr. Id. I expect your Bruins take care of the Trojans this fall and my Bears will take the Ax to The Tree. Best regards, --dfl