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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Patrice Gigahurtz who wrote (5989)	11/29/1997 1:16:00 PM
From: ajs	Read Replies (1) \| Respond to of 14162

Anyone use the some of the covered call web site services ? IE: (allin themoney.com) & is the fee worht it ? Thanks

To: Patrice Gigahurtz who wrote (5989)	12/2/1997 5:52:00 PM
From: David Beckett	Respond to of 14162

Patrice It hurts to give away the upside, but you do cover some downside risk, and you don't know what the upside might be until its too late. I've taken to doing thorough FA & TA and then waiting to write the CC. If it drops first, then I buy an upstrike call. If it rises first then I write the CC when it gets within three of four weeks of expiration. If its moving fast, I'll hold longer before the CC. As the rally progresses I'll buy a protective put (the PP is a new part of my strategy learned from techstocks.com. I haven't yet tried the upstrike call when the stock rises first. Where I've really gotten hurt is when bad news hit just after buying the stock and having done nothing else. The FA & TA doesn't help then. I'm relatively new at this having just started this year. I only dabled until Oct. Peformance is at an annualized rate of 42% since March. I'm convinced that 100% and better will be achieved with improved technique. The mistakes do hammer home the reason for more complex strategies learned from this thread.

To: Patrice Gigahurtz who wrote (5989)	12/6/1997 12:50:00 AM
From: Greg Higgins	Read Replies (4) \| Respond to of 14162

Patrice Gigahurtz writes: Regarding calls I've got to change my call writing methods. Later part of last week bought back my CCs for a profit and sold the underlying stock. However, I feel I'd made more $ if I didn't write the CCs in the first place. Forgive my intrusion. The business of the covered call writer is not to get rich quick. We are insurance underwriters, bankers, conservative folk. The golden pie is for call buyers, not sellers. An example from this week: This past weekend, Citicorp catches my eye. The stock closed Friday at 119 15/16 (120) and the bid for DEC 120 calls is 3 7/8. Some simple arithmetic shows that this is about a 1% per week return on my investment. Now, that doesn't necessarily make it good deal, because the downside protection must be there too. But there too, CCI looked to be worth the risk to the downside, as 116 would have been a decent price anytime in the last 6 months. I was determined to buy as soon as I got a chance Monday. Well, as you know, the stock opened at 122 and never looked back. Opportunity lost, nope. I bought at 128 and sold July 130 calls for 14. Rational, it's about a 40% annualized return when figuring in the dividends if I get exercised. (14 + 2)/64 * 12/7 + 1% dividends. On the down side, I break even all the way down to $114/share. If the stock ever did get down that far, I could buy back the calls at a tremendous price, and sell closer making my numbers better. The stock closed at $140 today. I don't care. I'm not in the business of picking stocks that skyrocket overnight. It's very close to the point at which it becomes a no-brainer for the marketmaker who bought the call to exercise it, however. Maybe he will. I don't care. It just means I get my 40% return overnight. Then I have to go an find a different stock to put it into. The truth of the matter is that if I had put money into CCI without selling the July calls, I wouldn't have gotten $140 a share. I look at how the stock traded, the way folks were trying very hard to keep it under $130 on Monday and Tuesday. The dip down to 135 on Thurday's close and the truth is, there's no way I'd be holding that stock today. I'd have sold for 4 or 6 or 7 or 8. Well, I've got my 14, and I've got a reasonable projected return and I've got downside protection. I've done my job. The golden pie is for the call buyers. Now if the marketmaker who bought my call doesn't exercise it at his first available opportunity, he may not get another chance. Consider how fortunate you would have been to be selling JAN 130 calls this past June. It seems to me that the greatest benefit from covered call writing doesn't really begin to appear until after you've owned a stock for 5 or so years. Consider the person whose net cost to own a stock is effectively 0. He doesn't care what it takes to buy back a call, because whatever it is, buying new stock costs more. He doesn't care whether the stock is up or down this month, since his cost is effectively 0. All that is important is the premium. Instead of selling the underlying stock, you should have sold another call. And keep selling them until your cost to own that stock is 0.