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

To: Delfino R Zavala who wrote (3114)	12/9/2001 1:00:49 PM
From: Dan Duchardt	Respond to of 5205

Delfino, When and what to write for a "portfolio" cannot be best determined in the abstract. If the portfolio is diverse, and if you are free to write naked index options you might do better that way than writing options on specific stocks. If your accounts are tax deferred, and you can only CC against you holdings, then you are limited to that strategy. There is a huge time difference between Jun 2002 and Jan 2004. Whether either of those makes sense depends on your assessment of how your holdings are likely to perform over the lifetime of the options, and how much intervening management you intend to do. I hope you don't take this as being evasive, but I don't think anyone can answer give you a concise answer to your broad question. Books have been written on this stuff, and yes there are some models that can help you decide what to do, depending on your assumptions about where the market may be going. The one I use is Excel based, and is available free at hoadley.net. Dan

To: Delfino R Zavala who wrote (3114)	12/10/2001 12:16:30 AM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

>> My question is how do you decide which option to sell... is it just a personal preference on the amount of risk you want to take in getting the stock called? It depends on your objective. Some use covered calls to generate an income stream from a highly appreciated core holding without risking triggering a taxable event, and gravitate towards "safe" out-of-the-money strike prices. Others use it to reduce their cost of ownership on new positions (the buy-write strategy) and prefer at-the-money strikes. And then there are those who write in-the-money cc's as a hedge when they feel the prices on their holdings have topped out. >> I am toying with the idea of selling a bunch of calls and or leaps on my portfolio... If you tell us why you have become interested in cc's just now, some of our smarter dummies may be able to offer useful insights. duf