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

To: Carl Worth who wrote (4736)	2/21/2007 2:49:39 AM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

>> if you sell calls, no matter how long you have owned the stock, that's a neutral to slightly bearish move... >> i write calls on stocks i think are going nowhere to slightly up... Those two remarks are at odds with each other, Carl. If you believe a stock is going nowhere to slightly up, your outlook is neutral to bullish, not neutral to slightly bearish. duf

To: Carl Worth who wrote (4736)	2/21/2007 7:23:08 AM
From: Jerome	Read Replies (1) \| Respond to of 5205

>>>i certainly don't write them on stocks i think are going down<<< Here is where we differ.... Many stocks are in a well defined trading range. So the object is to write the covered call near the top of the trading range, hope for a pull back of a point or two and then reuse the stock next month. Right now, CSCO, HAL, CHK, STX, INTC all seem to fit that pattern. They are all good cc writes and if I got called out I would just have more funds to work with. Keep in mind that if you got called out every single month on every single covered call....then every month you would have more money to work with. This is not a neutral viewpoint. And that is as bullish as it gets. In a few years your would have your own book fans, and book signing parties, and you would be rubbing elbows with Warren B. JMO....Jerome

To: Carl Worth who wrote (4736)	2/21/2007 10:59:00 AM
From: TimF	Respond to of 5205

whether you buy the stock at the same time you sell the calls, or already own the stock, is immaterial Its immaterial to the selling of the calls itself, and the selling of calls is bearish. OTOH if your doing a buy/write you aren't just selling calls. Your making a bullish investment/trade (buying stock) and a bearish trade (selling calls). You can consider the combined effect, rather then just considering each trade separately. Considered as one trade you get a slightly bullish trade esp. with OTM calls. I guess doing a buy/write with deep in the money calls could be looked at as something closer to neutral. Unless the stock crashes to be below the stock price (and you don't want it to crash that far because you own the stock), you expect to lose the stock, and keep the premium whether the stock goes down a bit, stays the same, or goes up. I guess if you figure on a slow steady decline (or even just stagnation) for a formerly high volatility stock, you could do a buy/write as a bearish trade. Believing in a slow steady decline is bearish. But really this is more a trade based on the belief in a decline in volatility and thus presumably implied volatility reflected in the option price.