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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: HF who wrote (6110)	12/12/1997 1:28:00 PM
From: Greg Higgins	Read Replies (2) \| Respond to of 14162

HF writes: Using the systematic writing approach, which strike price and months would you do if you had my present position of short three Jan 25 puts? You need to either a) forget about the Jan 25 puts and set aside the money to buy the stock, or b) close the position and take the loss. Whichever you decide, it has nothing to do with the approach you now intend to take. Start fresh. If you can't afford to start fresh and do a, then do b and start fresh. Don't mix the two scenarios. They are separate approaches. If you like the systematic writing approach, the first thing you need to do is decide whether VVUS is the stock to do it with. What if this stock goes to six? If you decide to do a, I would not write calls on that stock position until I could afford to do so and make good money at 20 or better. I read the LEAPS book. See the diagram on page 78. I really like using LEAPS as substitutes for stock and doing the covered calls on LEAPS. I covered my CCI Jul 130 calls today with Jan 2000 110 Calls. Sold 200 shares (at a 3% loss) to do it, but now have 4 Leaps + 200 shares. If the stock recovers, I sell the shares at a profit to cover the loss and eventually roll forward the calls on the LEAPS. The leaps cost me 34 1/4 cash money. This is $30 / share less than the margin cost of the securities; plus, I don't pay margin interest on the rest of the $64/share. Now all I need is to generate $34 writing calls over the next 2.5 years. When the stock recovers, I'll probably sell the remaining shares and buy more leaps. Maybe not CCI, but something.