Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: rydad who wrote (1859)	8/9/2001 5:05:18 PM
From: PAL	Respond to of 5205

Rydad: you are a pretty smart person: you don't belong in a dummy thread. LOL you are quite right. the css strategy is sometimes called a triple play in which: a. you buy the stock to cover the call, b. you sell call and c. you sell put. this triple play can be a straddle or a strangle. i'll post later about the drawback (i got to go). as far as 5 month expiry, there is no set rules. do what you are comfortable with. of course the longer the expiry date, the more premium it commands. maybe you can help by calculating various alternatives as to the time length of the option vs the return and risk. one thing to consider in choosing an expiry month: dec, mar, jun and sep are more volatile on the third friday because of triple witching. also the month after each quarterly report is a period on uncertainty for that stock. best to you paul

To: rydad who wrote (1859)	8/9/2001 10:46:49 PM
From: Thomas Tam	Respond to of 5205

A few assumptions to be made. 1) You have the extra money (roughly 50% of a one's portfolio to be in cash, in order to fulfill assignment if that occurs) 2) You have an account that can do it (I guess IRA's can't - in Canada our RRSPs are equivalent and no naked/short puts allowed) 3) You buy a company that continues to lead its market, etc., blah, blah, blah (buying the wrong company can really screw things up- we have all done this in the past year - imho) 4) You need to have bought near the low (how hard is this? Very! If you tried this with SEBl as it bottomed at 80, or 60 or whatever, things got very tight and your portfolio value isn't any higher, which I think should be the true gauge of whether a strategy is successful). The loss of capital is the single most damaging act that we can do when we invest/trade. A loss of 50% requires a gain of 100% in the future, just to break even. Major gut check time when I was short the July QCOM 60s puts and Oct 50's puts when QCOM was trading at 42. These transactions do not help one's sleep. 5) Tax consideration - can eat into returns, but this does not deter my trades. If I'm paying taxes, I must making some money doing this then, which in the greater scheme of things is why we doing this. Any other assumptions other? later