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

To: LindyBill who wrote (2463)	9/22/2001 1:31:40 AM
From: Mathemagician	Read Replies (3) \| Respond to of 5205

Your point that it should be the same amount either way may be right, and I will have to get it right quickly. Thanks very much for your input. You're very welcome. However, that was not my point. Part of my point was that arbitrarily setting it to be the same is a statistically certain way to lose money over time. Ignoring the long-term upward bias of the market, this strategy is equivalent to the following game: We will flip a coin repeatedly. Heads you win $1. Tales you lose $1. Transaction costs are $0.01 per flip. The expected value of your account at the end of this game is zero. To make the game more realistic by taking into account the upward bias of the market, change the above to heads you win $0.95 and tales you lose $1. The expected value is still zero, but you'll likely get there sooner. M