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

To: LindyBill who wrote (2214)	8/24/2001 10:40:20 AM
From: Road Walker	Read Replies (3) \| Respond to of 5205

Did a small buy/write this morning, bought 500 shares SEBL @ 22.40, sold 5 Oct. 22.50 calls @ 3.10. Return if exercised 16.58% Downside protection 12.05% to $19.30 56 days to expiration. John

To: LindyBill who wrote (2214)	8/24/2001 12:15:41 PM
From: Uncle Frank	Respond to of 5205

>> I went ahead and placed a day order to close the calls out that I had sold. Q at 5.10 and NTAP at 1.10. See if they will fill in the morning. This would turn a very decent profit for a weeks try if it works. You're making a pretty fast transition from covered call writer to options trader, Bill, and I'm not sure it's well advised. If you had been successful in buying back your qcom cc's, you'd have only retained 1.00 of the 6.10 you received, or 16% of the premium. Considering you were selling atm calls, and the chances were only 50/50 that you had selected a short term high point from which to do it, I think scalping a buck is too small to justify the risk. I only get tempted to close early when I can keep >50% of the premium in <25% of the time. >> I am kicking some thoughts around on the best way for me to generate some income the next few months in this market. I thought you had already found it based on your successful initial transaction earlier this month. You covered for a couple of weeks, and retained several months worth of living expenses when you closed the positions. >> If I used QQQ for a large chunk of this it would make my downside less risky than, say, going three Gorillas... I would try to sell the calls on an uptick, and put in a "Good until cancelled" order to close the call out at, say, a 10% profit. That's fine, but you'd be left with the depreciated stock, and your portfolio value (stock + retained cc premiums) would be less than it was when you bought the stock. If you have some reason for confidence in the recovery of QQQ, I'm sure it would make a lot of Brinker fans happy. >> I could do a "buy-write" for contracts at 2.40 and an buy to close order at 2.10. Normal fluctuation should fill the order in the next week, If it does, I do the same again. If we could count on "normal fluctuation" your plan might have merit, but keep in mind that the best time to initiate a buy-write is when the stock is at the bottom, not on an uptick. Bill, I've been doing options for a while, and it's extremely risky. That's why I've gravitated to the "safety" of the covered call play, where time is on my side. Why not sit back and let the normal erosion of time premium create a handsome revenue stream for you instead of trading? duf

To: LindyBill who wrote (2214)	8/26/2001 2:40:51 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 5205

LindyBill, Normal fluctuation should fill the order in the next week, If it does, I do the same again. If this strategy works, and you really are able to trade in and out of the options for a 10% move on a weekly basis, you will do a lot better simply trading the QQQ. Figure out how far QQQ has to move for you to clear 10% on whatever strike options you are trading. I think you will see trading QQQ offers greater potential Also, you might consider simply buying options to take advantage of such small moves. If you only buy the number of contracts you would trade as part of a CC, at least long options give you downside protection, so if things go the wrong way in a hurry you can't take a big loss (as compared to buying the same number of shares of stock). If this sounds too risky to you, then what you are proposing is too risky as well. What if you buy back a call at 10% profit and QQQ keeps going down? Are you willing to ride it out all the way? Dan