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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: hal jordan who wrote (7270)	4/13/1998 4:27:00 PM
From: James Joyce	Respond to of 14162

Compounding is not a new thing. THe issue is as to whether or not there is an application to CCing which can increase profit. There are various funds which have used CCing to increase returns. My approach is to always sell more calls than I am covered for and then use the funds generated to buy the stock needed to cover. This provides an immediate compounding which is one period earlier and thus increases the compounding curve. The difficulty is that you have to make some assumptions on the underlying stock behavior and what fallow up action to take in each behavior. My calculations sho nothing close to a million from $10K i three years. The periods would need t be very short or fast rolls) and the commission costs could be significant. But a return in the 40 to 50% is achievable. James

To: hal jordan who wrote (7270)	4/13/1998 6:06:00 PM
From: Herm	Read Replies (2) \| Respond to of 14162

Hi Hal, I have to agree with James. A more realistic return would be 40%-50% annually at best which is still fantastic. That is close to what I have be doing. But, of course there is always the chance of another VVUS or the old USRX (and how much margin you use) which can wipe you clean of most of your profits and you are back to square one! Yep, the value of your portfolio goes up and it comes down. If you are really careful and CC only conservative stocks you may keep your premies and capital gain money for longer lengths of time. The compounding formula is pie in the sky until you actually do it! Stock selection is critical and all of that takes lots of homework.