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

To: rydad who wrote (2173)	8/21/2001 9:22:22 PM
From: PoetTrader	Read Replies (1) \| Respond to of 5205

Rydad...thank you for your kind words. OT (Southern Cal..so am I and trying to fight the heat!) I vaguely remember the Roth Income Generator but I wasn't sure if I understood it all that well. It seems simpler to me to do cc's and sell puts...I think I end up doing a straddle here and a strangle there without realizing it!! I know what you mean about worrying about what might be put to you. I haven't been put anything yet because I've mostly done cc's. But I got out of some positions on stop losses today like GE (made a small profit) and the first thing I did when the market tanked after Mr Fed cut was to sell the Sept 40 puts for 1.30. I too am looking at Qcom...I wrote calls at the Sept65's for 4.20 and am now waiting to sell the Sept 55's or even 50's depending on how the market goes tomorrow and next day. Once upon a time it seemed like there were many stocks I wanted to own if I could only own them at that certain price. But today it's hard to call. I wish you well on that front. Let me know what you come up with. Good luck!! Best, PoetTrader

To: rydad who wrote (2173)	8/23/2001 2:04:43 PM
From: Allen Furlan	Read Replies (1) \| Respond to of 5205

Rydad, this may be of use to you. These are my opinions only but I have been playing options for about 20 years and consider myself a conservative investor even though I have consistently written so called "dangerous" naked options. From about 1990 until 1995 I wrote options for my father's small retirement account to supplement his social security pension. Here are the approximate parameters that you could expect. A. Volatile stocks with shorter term(4-5 weeks) out of the money calls. Profit of X about 80% of time and loss of 3X about 20%. Net .8X-.6X=.2X or 2% per month if your options bring in 10% of margin set aside. Example is a write made today of nvda Sept 100 call at 1. Initial margin is 8.5 and yield is 1/8.5=11.7% Risky high volatility stock extremely over priced but with backing by momentum players and hence large time premium. B.Non volatile stocks with 8-9 week time frame and about 5% yield. Expected value with 90% success and 10% loss of .3X (.9X-.3X=.6X) or net .05*.6=.03 over two months. So you can see that about 1.5-2 % per month is about your best expectation given that your losses though less frequent than gains can be significant. In the case of my father's account he had a 60K Treasury for margin and earned about 10% per year on option writes and 5% on the T bill. Don't get to confident that you can do 3% a month. Make sure you factor in the sizeable losses you can expect. The strategy I use in my accounts is to write both covered calls and naked calls in a way that the portfolio is balanced(ie upward movement in stocks compensate for losses in call positions. My last 4 naked writes have been 7 vjgao(brcm) at 2.2 on 7/31;10 vxlah(elnk) at .6 on 8/07;10 viwal(ets/rstn) at .55 on 8/17 and 5 rvuit(nvda) at 1 on 8/23. As you can see the leaps are low yield but also in my opinion relatively low risk. Again in my opinion the write of naked puts on a stock like GE is considerably more risky than far out of the money calls on overpriced stocks. Hope this helps.