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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: Greg Higgins who wrote (6339)	1/8/1998 11:48:00 PM
From: HF	Read Replies (1) \| Respond to of 14162

Hi Greg, What do you think of this idea to increase your return on CREAF? Say I do not mind owning 1000 shares. Price today closed at 17 5/8. What about a covered combination of buying the stock, selling calls, and selling puts? Example: Buy 500 shares. Cost 500 x 17.625 = 8,812.50. Sell 5 Feb 17.5 Calls at 2.625 = 1,312.50 Sell 5 Feb 15 Puts at 1.125 = 562.50 Your premium after commissions is $1,795.00 Scene 1: Stock called (Stock above call price at expiration.) Net Profit = $1,732.50 Percentage Return = 24.58% Scene 2: Put assigned (you buy another 500 shares at 15) Net cost on total stock position = $14,577.50 Average price/share = 14.58 Start writing covered calls on 1000 shares to reduce basis. Scene 3. Stock between call strike and put strike at expiration. Unrealized profit = $1,765.00 Percentage return = 25.04% These calculations come from the CBOE Covered Combination Worksheet. This seems to me better than just covered calls provided that I don't mind owning more stock if the puts are assigned. If you like it at 17.5, then you got to love it at 14.5. Any comments would be appreciated from anybody. Thanks. Hank