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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: Mark Mandel who wrote (6570)	1/26/1998 7:38:00 PM
From: Herm	Respond to of 14162

In the past we used the RSI and Bollinger Bands together to determine when hopefully write safe CCs. The RSI over 70 typically along with the BBs signal an "overbrought condition" and pending sell off (price pullback)as either overhead resistance sets in or normal profit taking. Doug's new chart may serve as an alternative to RSI and BB. We are testing that out as we speak. webbindustries.com A high RSI (+70) should allow a CCer to write at or in the money strike price for higher premies. Note, the Delta will also be higher for those in the money CCs. Hence, when the pull back does come you as the CCer would profit greatly by the CC decay which you later cover at a much cheaper price. Or, you could use the high RSI to buy a cheap PUT(s)to capture the appreciation in the PUT as the stock drops in price. Of course, this strategy is possible only if you net cost basis (NUT) is lower than the CC strike price. I hope that helped to refresh your memory!