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

To: FaultLine who wrote (1906)	8/10/2001 6:35:03 PM
From: jaytee	Read Replies (1) \| Respond to of 5205

HI to FL and all: Figured it was finally time to expose my bona fide "dumminess". I have been a long-time lurker, and admirer of this forum. I was wondering if anyone could help me? here is a scenario for what I am sure will launch me into the hall of fame for "dummy-dom". PWAV is at 18.14 today If, in theory, I BOT: PWAV FEB 02 5's for 13.80, and SELL the SEP 20 calls for 1.45 . . . one could pick up nearly 10 1/2% on the transaction (not incl comm.'s) plus an additional 1.20 if called out in september. My first DUMMY question is, should I be overly concerned re/ the very low open interest (only 2) if I am purely thinking, in this example, of using the FEB o2 call as a vehicle to generate premiums? Will I have problems later (due to liquidity, I guess you would call it) with such low open interest? Secondly, am I better off with the FEB 7.50's instead? The lower cost of 11.50 makes a HIGHER percent return when you pay less on the same sale of the SEP 20's for 1.45, but I guess that is the trade-off(?) for the lower return potential if you do, in fact get CALLED OUT @ 20 bucks? Is that what you have to look at? More of how much DOLLAR potential there is over PERCENT potential? ( plus the extra "juice" if called out? How do you all view such scenarios on covered calls? And last, but not least, to certify my dummification . . . do any of you use those cc calculators? Which are the best, and can any old DUMMY use 'em? sincerely, the guy in the dunce cap jaytee