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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Mattyice who wrote (40170)	11/19/2010 3:27:19 PM
From: E_K_S	1 Recommendation Respond to of 78470

Hi Matt Re: Covered Call From the list you posted here are the stocks I own. finance.yahoo.com I own these and continue to accumulate shares at or below their 200d MA. I have no intention to write covered calls on these unless they sell well above their 50d MA and I believe they no longer have intrinsic value. My strategy has changed over the years on covered calls. When I was younger (over 20 years ago) and did not have too much investment capital, I did a lot of buy write strategies. I collected dividends, call premium and usually got the stock called away. I typically focused on buying value stocks that later became a multi bagger if I just held 2-3 years. Now, that I am wiser (grrr) I try to use covered calls to hedge a more speculative position (those that typically do not pay dividends) to generate a guaranteed income stream on the investment. My goal is to make sure I obtain some minimum rate of return (at least 10%) on every speculative investment. The other strategy for covered calls is to juice the dividend return by writing covered calls on high paying dividend stocks (ie. typically MLP's or REITs). I will try to buy at a value price (below 200d MA), let the stock run, then sell a 6 month covered call on a portion or all of the stock owned. There are many different strategies to use covered calls on. With value investments, it may take the market a long time to realize the true intrinsic value that you do. By writing a few covered calls, you can collect the call premiums while you wait. Sometimes you guess wrong and the stock gets called away on a buyout. My other rule of thumb is to sell a covered call out six months at $1.00 or more. Remember a covered call is like renting your stock position out. Calls are not that liquid on some companies and the spreads are huge. I use the Black & Scholes pricing model to determine the "fair value" to price the call. Finally, I have made a lot more money holding on for the multi bagger than collecting the call premiums. However, when combined with an overall buy sell strategy, it helps me generate the revenue streams I need to pay my bills. EKS

To: Mattyice who wrote (40170)	11/19/2010 5:12:08 PM
From: Dan Meleney	Read Replies (1) \| Respond to of 78470

GS buy/call list....that's a great list...to generate fees for GS

To: Mattyice who wrote (40170)	11/19/2010 5:37:25 PM
From: Madharry	Respond to of 78470

you have to be real careful with this kind of situation. i got burned writing chesapeake calls. getting the money up front was great holding on while the stock tumbled from $64 to $16 not so great. even worse is what happened to my friend whose broker was writing calls against lehman stock. i think my friend held on from $80 to zero. Now I think it makes sense when you have a multibagger in a tax account and you can generate income from it with out generating a huge taxable gain.