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

To: Wyätt Gwyön who wrote (2105)	8/19/2001 4:16:18 AM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

>> the thing i don't like about covered calls, in the context of certain nonexistent, hypothetical investors who think they're diversifying their portfolio by, for example, adding a storage "gorilla" and a back-office software "gorilla" to their wireless "gorilla" (with a portfolio weighting of 33% each!), is that CCs can get people thinking bassackwards about what "conservative investing" means. I think you're really addressing portfolio allocation rather than covered calls. The former is of paramount importance, while the latter is merely an opportunistic method for generating revenue during a choppy market. >> i would sell ATM (where premia are best) and i would ALWAYS let myself get called out when the underlying trades above the strike. Good recommendations for buy-write practitioners, but you don't address the interests of those who are writing against highly appreciated long term core holdings. >> that is not to say one couldn't sell covered calls and be prudent at the same time. but i think the policy horse needs to lead the tactical cart (CCs). Agreed. That's my biggest objection to buy-write, where the selection process tends to focus on premium potential rather than the underlying equities. uf

To: Wyätt Gwyön who wrote (2105)	8/19/2001 8:05:24 AM
From: alanrs	Read Replies (1) \| Respond to of 5205

"the thing i don't like about covered calls, in the context of certain nonexistent, hypothetical investors who think they're diversifying their portfolio by, for example, adding a storage "gorilla" and a back-office software "gorilla" to their wireless "gorilla" (with a portfolio weighting of 33% each!)" I don't know about everyone here, but my guess is that most are far more diversified than the posts might lead one to believe. In my own case, my stock portfolio is heavily weighted toward tech-about 70% in about 20 companies-but is only roughly 40% of my half vast empire. It's boring talking about CD's and GIC's and REITS, and one can't incorporate them into any option strategy. Others have pointed out the value of learning how a limited universe of stocks and their associated options behave and sticking to them. Tech stocks, being volatile, are potentially well suited to this. "in my opinion, a covered call should not be written unless one is willing to be called out." In general, I agree with this and the points you made in this regard, especially the repair strategies part. There are specific circumstances where this may not apply though, as I believe Frank rightly pointed out. "call premia have come down quite a bit anyway" I've definitely noticed this and am looking for different ways (spreads, straddles, selling puts) to approach all this. Like everything else, it's a process, and learning takes time. Also, what works today may not work tomorrow. ARS