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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: the options strategist who wrote (7582)	6/10/1998 2:24:00 PM
From: Tom K.	Read Replies (1) \| Respond to of 14162

Jen, Here's a simplified explanation of the approach that I've been using. Most people buy stock for appreciation and that is generally a long term process. Options, however, are by their nature a short term approach. My experience in the past when I used both, i.e., tried to obtain short term profits with the options while trying to maintain long term profits with the stock, I'd get frustrated at trying to juggle both ends to be profitable.. in fact, I began to realize that the basic objectives were in conflict. i.e., short term is different from long term... I amaze myself with these revelations. So I decided to focus on either being long or short. in other words, to stop being greedy and to stop trying to win on both sides (and losing). So I decided to approach it as a business. I would buy a high quality machine (stock) and operate a process (CC'ing) that uses the machine to make money at a good rate (>40%/year). If the machine I buy loses value in the marketplace, I'm no longer frustrated because my business is not focused on selling machines (stocks), it is running the process (selling options). In fact, if I research well and buy a high quality machine, it may fluctuate in value, but the likelihood that it will lose its cash generating ability is quite low. In fact, history shows that good quality stocks will retain value over time so when I finally get tired of the machine, I'll still get value for it. Why I feel my approach is somewhat different is because a lot of the dialogue that I read appears to be about the fluctuations in value of the underlying stock (machines). In my case, since I've made the purchase, my focus is primarily on how can I continue to squeeze more out of what I bought. There is a lot more behind what I have to do to make it work, but that's essentially the theory. I've been doing this just about a year now and so far it has been exceeding my targets. However, we've been in a bull session and that can easily mask weaknesses in theories. But as long as it continues to work for me, I'll keep doing it. Hope that's helpful. Tom