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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: Herm who wrote (7666)	6/17/1998 5:26:00 PM
From: Herm	Read Replies (2) \| Respond to of 14162

WATCHING THE CHARTS! I have tried to read everything I can get my hands on regarding covered call writing. I must say that very little (no, NOTHING IS WRITTEN) is said or printed for investors to learn when to CC and when not to CC. Can you figure that out? On this forum, we go out of our way for the sake of our new lurkers to repeat what is now the obvious to our long term readers/partners. We use the Bollinger Bands (BB) and Relative Strength Indicators (RSI) on our charts to pinpoint when to sell CCs and when to cover CCs. As a follow-up on BTGC. A few days ago the whole market (DOW and NASDAQ)took a dump. Now, it is two days latter and the markets have both rebounded. BTGC had been dropping in price for a least one week straight. The stock price was slowly approaching the lower BB and the RSI was reaching a low of 50 which was fairly low for this stock. I plotted the chart for three years and it was clear that a 50 RSI was not a typical reading. It was evident that BTGC ALWAYS rebounded upwards when the price touched the lower BB and at the same time the RSI hit 50. That information provided me with a reasonable expectation that BTGC would once again repeat this pattern. So, it would be to my advantage to cover my CCs (since most of the profit was locked in) and not wait for the July expiration. Further, I now had the opportunity to average down my net cost basis if I purchased another 100 share of BTGC. I like to roll my premies into additional shares because I'm able to compound my rate of return faster and lower my commission cost by being able to CC more contracts per round. In summary, what does the charting indicators have to do with covered call writing? EVERYTHING! Without a technical reading of the chart it would be impossible to calculate when to sell and when to cover your CCs. Put it another way, you most likely would not be making any $$$ money CCing! It would be more of a hit and miss. That is why I can't understand why book after book of "the experts" say you are foolish to CC during bull markets. The wild bull runs in stocks come at certain points. Usually, an annoucement out of left field or a short squeeze. The rest of the time stocks move up/down and sideways within a price range or channel. There is a time to sell CCs and a time to sit back and wait for the next opportunity! The next step would be to wait for BTGC to appreciate some more. That would mean perhaps a slow upward climb until the price reaches the upper BB and the RSI move above 70. In other words, BTGC needs an event such as the July earnings release. If we don't hear from management soon, it will most likely be a positive earnings. But, I just read the SEC recording of CEOs insider buying more BTGC shares in late May. Indeed, a very good sign! Do you think the CEOs would be buying THOUSANDS of shares of their own stock if the expected July earnings was a dog? The stock is way undervalued at this point. bigcharts.com NASDAQ: (BTGC : $7 7/8) $371 million Market Cap at June 17, 1998 Trades at a 33% Discount PE Multiple of 22.5 X, vs. the 33.4 X average multiple at which the Drugs SubIndustry is priced PS IFMX coming off a bottom and looking good for a LEAP CC setup. XRAY moving off base to recover. Company buyback making sure stock recovers from recent down gap. Comments and improvements are encouraged please!