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

To: Bridge Player who wrote (4693)	12/27/2006 10:14:00 AM
From: Hepps	Read Replies (2) \| Respond to of 5205

Unfortunately, I missed the chance. APR 45 is now .85 and climbing with the Stock. It isn't profit til its in your pocket. I think that I'll get another chance. I'm half way through McMillian's book "On Options", and can see that I've still got a lot of homework before things are no longer just dumb luck. interesting chapter on implied volatility predicting changes in trend. The book covers everything but not much for details on the basics. Also, orientation is toward pure daily trading, market trends, and strategies for extracting profit from volatile situations. Not a bad book, and not nearly as "Dry" as his other is said to be.

To: Bridge Player who wrote (4693)	12/28/2006 3:15:26 PM
From: Hepps	Respond to of 5205

Interesting issue: choice of strike and expiration when writing naked puts (or calls for that matter). More premium vs. shorter time to exp? Weighing premium, risk, time. How do others here make these decisions? Anyone use formulas of any kind? Seat-of-the-pants? And another issue: if you write a short put, being willing to be assigned the underlying, and it goes in the money near expiration, do most tend to go ahead and take the stock? Or do you roll the option out to a later month, taking the loss on Sched D but also taking in more premium than the amount of the loss? Several of my short puts are underwater and I may face that decision in January. More than adequate margin available to accept stock if that is the decision. Reading McMillian's book, "On Options" it is apparent to me that I won't be able to answer your questions until I get a better grasp of the factors involved. I can say that my response regarding Puts will be converse to the VIX and Volatility of the stock, as the higher the general market volatility and stock volatility, the better the premium payed for the option. My initial take is that the VIX generally indicates that there are a few times a year when buying stock is best; when the volatility is highest. July of this year was the last real mark on the wall. A lot of the issues that you're talking about are "Greeks" Volatility on an option, Volatility on the volatility, time decay factors, etc... When I figure out what I'm comfortable with, I'll share it, but I'm not even sure about what I don't know at this point... Uncle Frank commented that he wasn't selling options because the premiums were to low... He's right, the VIX is down right now, and when a VIX gets too low, Mc Millian argues that it indicates a pending explosion, either up or down. Puts are best sold at the bottom, calls into a strong bull trend with underlying indicators of weakness... That's all for now, Hepps