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

To: Dr. Id who wrote (3222)	1/10/2002 2:42:15 PM
From: Dominick	Read Replies (1) \| Respond to of 5205

My strategy is to get 3% or 4% per month or more and be called out to free my funds for the next opportunity. I do have other stocks that I write and don't want called. Buying HAL @ $11.14 and write for $2.10 lowers my cost basis to $9.04. If I'm called I get 10.62%, (10 / 9.04). If not called It's 18.85%, ( 2.10 / 11.14). The gambling part is will HAL be here in February due to a rumor of bankruptcy. dom@hopei'mright.com

To: Dr. Id who wrote (3222)	1/10/2002 5:30:10 PM
From: BDR	Respond to of 5205

<<Why didn't you sell out of the money calls?>> Speaking just for myself, I have taken to writing in or at the money calls because capital preservation is of increasing importance to me. Sure, if I get called out with an OTM call my return is greater, but in this market and with most stocks I feel I can't assume they will only go up. If you write an OTM call and the stock drops (distinct possibility with HAL) you are worse off than with an ITM call. I am willing to settle for a higher probability of a lower return instead of a lower probability of a higher return. I am also less wedded to the idea of holding on to the stock long term. If I can make 4% in a month or less I will let the stock be called. Actually, writing ITM calls 4-6 months out gives me the best combination of return and protection for my purposes. Also reduces the amount of commissions I pay. In some cases I am increasing the return by substituting deep ITM LEAPS calls for the stock. Given the higher potential return (because of the reduced amount of capital invested) and the higher cost of commissions for options, I have taken to writing the first OTM call against the LEAPS to reduce slightly the risk of having to close both positions at expiration.