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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: Linda Kaplan who wrote (6141)	12/16/1997 9:18:00 AM
From: Greg Higgins	Read Replies (1) \| Respond to of 14162

Linda Kaplan writes: I also bought a small amount more of GENZL, JMAR and CPQ yesterday, using AIM. What's AIM? Does it explain these purchases? CPQ I understand. It usually trades over its 200ma and it was very close yesterday. Historically your downside there is at most 32-35, and that's a fairly unlikely proposition. Those other two stocks look to me like you're chasing a bottom. Why don't you wait until the stock finds a bottom and starts to turn up? GENZL looks like it has support at 7, why not wait to see if it's really there? On JMAR, I don't see support above 2 1/2, the stock closed down on lower volume, generally meaning it's going lower.

To: Linda Kaplan who wrote (6141)	12/16/1997 9:36:00 AM
From: Douglas Webb	Read Replies (2) \| Respond to of 14162

I've been playing pretty much the same game as you, although with a much smaller pot. Overall, I'm down over $10,000 since May, most of it in the past two months. Considering that I've invested $12,500, that's a big loss. I'm in a pretty good position to recover, though. I'm holding some calls on UGLY which are about to expire worthless, some CREAF stock, and some CREAF calls for Dec and Jan. And, I've got myself a recovery plan. One of the best bits of advice I can give you right now is Don't buy anything until you get your margin debt under control. I kept doing that, hoping for a rally to carry me out of my hole, and now I've got a bunch of worthless Dec. calls. Sell stock in your losing positions for the tax write off, and get your margin ownership above 50%. (Or, if you think your biggest losers are really good companies, like CREAF or VVUS, you can hang onto them and sell the dogs.) I useful number that I've been looking at is my margin call limit. I've figured out the formulas my broker uses to determine my margin ownership, and since I've only got one stock I can figure out my margin ownership for any given price of that stock. The margin call limit is the stock price which results in a 35% ownership. Right now, based on my current holdings, CREAF would have to rise to $19 for me to hit 35%. It's currently at $16.50, which is why I've got a margin call due Thursday. I figured out that if I add another $3000 to the account, my MCL drops to $8, and my ownership rises to 71%. That's a safe position to start my recovery. I'll have a lot of buying power at that point, and I've determined that I can buy about 150 shares @ $17. At that price, my MCL is still low at $13.50, and my ownership is still >50%. I have enough buying power to get more stock than that, but I want to keep the MCL below CREAF's 52-week low. By taking this approach, I'll be able to profit from even a mild recovery ($22-$25) even though I expect CREAF to go to $29-$35, and my current net cost is $24.30. When I can afford to diversify again I'm going to have to figure out how to apportion my margin debt to each stock I own in order to do this. I suspect it'll just be a matter of good record keeping. If so, this should be a very handy portfolio management tool. Doug.