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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: Timothy Jones who wrote (7064)	3/11/1998 12:18:00 AM
From: Douglas Webb	Read Replies (2) \| Respond to of 14162

Generally speaking, to execute a covered call strategy you need both the stock and the options to be fairly liquid. If they're not, the prices could move against you a lot before you're able to close your position. For stock volume you probably want an average of at least 100,000 shares a day, assuming you're going to be trading ~1000 shares at a time (or less.) If the stock is very volatile, you might want higher volume, 1,000,000+. For open interest, I try to stay away from calls with OI < 100 or so, assuming you'll be trading ~10 contracts or less. You could probably write calls at the current bid even if OI is near zero, but you wouldn't be able to buy them back before expiration. With a higher OI, you're more likely to find a buyer when you need one, and you'll have a better chance of trading inside the spread. Doug.

To: Timothy Jones who wrote (7064)	3/11/1998 8:49:00 AM
From: Tony D.	Read Replies (1) \| Respond to of 14162

Tim, Doug or Herm would probably be better qualified to answer your question, but I'll take a shot. The volume is the number of units that changed hands up until that time of that day while the outside interest (OI), is the total number of units in the market at that time. Tony D.