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

To: fmikehugo who wrote (3973)	10/10/2002 3:46:44 PM
From: JohnM	Read Replies (1) \| Respond to of 5205

It's simply a question of finding the right metric to use in determining a stock's potential for high premiums on covered calls. Mike, Let me butt in to this conversation and offer something. Lawrence McMillan's book, Options as a Strategic Investment, has a set of these. Great book. Don't know how anyone would venture into these shark infested waters without it. Hope this helps,

To: fmikehugo who wrote (3973)	10/10/2002 4:27:05 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 5205

IV is derived from quoted option prices and reflects the specialists bias about the future of the stock price action. Theoretical prices are based on historical volatility, which is derived solely from the price action of the stock itself over some period of time. This site identifies historical volatility based on 10, 20, and 30 day calculations ivolatility.com I subscribe to myTrack for data. I think even the most basic subscription gives you access to historical prices and volatility data. Their option display quotes and average volatility, and a fair value for each option based on that average so you can see where a specific option price is relative to theoretical pricing. mytrack.com I don't know that it is particularly valuable, but his site lists calls with high % premium relative to underlying price. coveredcalls.com

To: fmikehugo who wrote (3973)	10/10/2002 4:35:45 PM
From: DiB	Read Replies (1) \| Respond to of 5205

Mike, high premium often leads to erosion of the price of underlying... my advise would be start CC writing on the DOW stocks or DOW index several months out... this strategy gives you decent premiums on solid companies with reasonably low probability of losing your shirt... Then, if you wish to be more aggressive, all power to you...

To: fmikehugo who wrote (3973)	10/14/2002 9:05:36 PM
From: LemurHouse	Read Replies (2) \| Respond to of 5205

<<<It's simply a question of finding the right metric to use in determining a stock's potential for high premiums on covered calls.>>> While such tools exist, I think the problem with them is that they tend to distract one's attention from the more fundamental question of whether or not it is wise to be long (or short) the underlying in the first place. The downside potential of the underlying will be significantly greater than the potential CC return, so IMO the main consideration is that you have to be in the right stock(s) to begin with. That is, if you are going to be long the stock, you'd better have a better reason than simply generating CC premiums. Reliance on metrics or screens which identify seemingly rich premium opportunities make it easy to take one's eye off the ball IMO. I think that dUF's observations re the primacy of the (stock) investment decision is good advice. Stock decision first, options decision second. I find that once you've made the stock decisions you don't need a screen anyway, nor any metric beyond Blk-Schls. Just IMO. As a more general observation FWIW, this doesn't seem to be a particularly good time to be writing calls.