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

To: Ken R who wrote (4791)	3/8/2007 3:25:28 PM
From: golfinvestor	Respond to of 5205

100% in QCOM at 76 years old. Who needs diversification. :-) If you do decide to sell cover calls you can use the premiums you collect to offset the amount of QCOM you will need to sell to cover your IRA RMD. Reading through the earlier posts on this thread should give you a good idea of what is involved in writing covered calls. Good luck.

To: Ken R who wrote (4791)	3/8/2007 3:32:45 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 5205

>> it seems sensible to do so as often as I can on the amount to cover my RMD. any guidance would be appreciated. I'd love to help, but I'm clearly not qualified, as I don't even know what an RMD is :-/.. In general, I think writing covered calls agains a sheltered position is an excellent use of the vehicle. If you're never called, the premiums could be used to satisfy your minimum withdrawal requirements. And if you do get called, there are no tax implication. Sounds like a plan. uf

To: Ken R who wrote (4791)	3/8/2007 5:13:47 PM
From: alanrs	Read Replies (2) \| Respond to of 5205

If you're required to remove roughly $10K of something, and you have roughly 5000 shares of Qcom in the account, you have a lot of possibilities. For instance, you could sell calls against quite a few shares (say 1000-10 contracts) with strikes way out of the money. Right now you can get $35 for the April 45. The market and Qcom have been up, so sell 2-3 now. If it continues up, sell a few more, either at that strike or a higher strike. You could easily make $5k a year doing this while only risking 1000 shares being sold. If you were nimble and good at this you might make the whole $10k between options and dividends. Or you could sell fewer options closer to the price of the stock. Right now the April 40 is worth around $200 and the April 42.50 is worth around $90. Or you could start the year selling way out of the money and if nothing got called away, finish the year selling at the money. Or you could decide what you would be satisfied with and go much further out in time to get a one time higher premium. Covered calls are simple, but there still are a lot of ways to go about it. I try to only do things that I'm comfortable with if the worst possibility comes to pass. ARS

To: Ken R who wrote (4791)	3/8/2007 11:42:54 PM
From: JGoren	Read Replies (1) \| Respond to of 5205

I have been selling covered calls on my Qcom since about 2002 in both my regular and tax-free pension account I usually sell a little out of the money. On good news, it can be pretty gut wrenching as to whether you have to buy them back at a loss. Still, CC's are a good way to add a little income. Since they are in your IRA, you don't have to worry about capital gains taxes but it is a way to increase your return. I don't know how that affects the minimum distributions requirements. If you have been a Qcom shareholder for years and watched the stock closely, you have a half-way decent idea of how the stock moves. As you know, it can be pretty volatile. Since the shares are in your IRA, you can choose to let your stock be taken on a run up and then buy back if you wish when the stock price declines. Or take a distribution and use some of the money (e.g., the distribution less taxes if you don't need the money) to buy back some of the shares outside your IRA if you'd like to maintain your position in Qcom. There are lots of ways to play it. The problem right now is that there is so much going on newswise with NOK and the so much litigation. You could wake up one morning with the litigation settled and the stock could jump 10 points or more in a day or two and you'd be "short" and not enjoy the big runup. At some point by December 31, 2008 (deadline for NOKIA to exercise its option to extend the current license), things should be decided and you could see the stock at 70. At least, that's what I hope will happen. Be sure you have a broker who knows something about covered calls. If he has a lot of clients who bought Qcom in the late 90's, then probably a number of them are selling covered calls on the stock and he should have a decent feel for which ones to sell and when. Good luck, whatever you decide.