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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: Bill/WA who wrote (7676)	6/18/1998 2:13:00 AM
From: Ira Player	Respond to of 14162

Purpose: would be satisfied if called @ 32.50 plus the extra 2/shr. Downside: 1.If stock rises above 34.50, I loose out on the resulting appreciation. 2.If stock tanks to low 20's, I have to hold till Sept. expiration to do something. Upside: I'm satisfied with the 25% return in 9 months. Comments: Purpose: If you are not satisfied, roll the option out by buying back the original and writing another at a higher strike a few months out. If the original is just slightly in the money, you can pocket a little more premium and keep the game alive. If it's very deep in the money, it is hard to roll out. Downside: 1. Only if it goes very deep in the money. Otherwise, you can roll it out. 2. Why hold? If you must take the loss, buy back the option and sell the stock. Close both positions. You don't have to hold on until expiration just because you wrote the option. Enjoy the ride, Ira

To: Bill/WA who wrote (7676)	6/18/1998 12:52:00 PM
From: Herm	Read Replies (2) \| Respond to of 14162

Hi Bill, What you indicated about the profit/loss prospect was very good. You know what could take place. Now, here are some other considerations. Defensive Play: 1. If BAY moves down then the CCs you wrote will go down below the $2 they paid you. Eventually, you could buy them back (cover) for much less than the original premie. When you notice that downward movement is taking place I would check out the charts (RSI and BB) to determine if I could capture some profit from PUTs as a sideshow. The PUTs would be around 2 strike prices below the current stock price. Your CC premies could help pay for that! You may be able to turn that $2 premie into a $3-$4 profit from the PUTs. That offers alot more downside protection. Offensive Play: 2. Here is another point of view! If BAY really starts to take off and gaps upward, verify that on the chart (RSI and BB) to determine when BAY may peter out! Find out how much short interest is out there. I HATE TO COVER AND ROLL UPWARDS in CC strike prices! Here is why! When you sold the CCs for 2 your net cost basis on the stock dropped down from $27.50 to $25.50. If BAY starts to move how do know how much it will move? The charts help but why risk it! How about making even more money by putting together a recovery spread that MAY ACTUALLY COST YOU NOTHING out of your pocket. If you are so sure it's going to the moon then this is a no brainer! You call up your brokerage and place an order for a debit spread on BAY for any of the following combinations. I used Doug's web site to come up with the calculations. webbindustries.com I used your 200 shares at a net cost basis of $25.50 to come up with the following profits. Take notice of the $32.5 strike price for the CCs you already sold to complete the spread. The major advantage to this approach is that 1. you can do it many times at no/little cost to you. 2. less risk than covering and rolling up a few strike prices on the CCs. 3. better chances of profits if you are called out of some contracts since you own additional long calls. Series Long Short Entry Credit Total Gain JUN Call Buy 2 @ 22.5 Sell 4 @ 25 $200.00 $600.00 Outperforms Stock Ownership in price range: $0 - $28.50 JUN Call Buy 2 @ 20 Sell 4 @ 22.5 $700.00 $600.00 Outperforms Stock Ownership in price range: $0 - $28.50 JUL Call Buy 2 @ 25 Sell 4 @ 27.5 $75.00 $975.00 Outperforms Stock Ownership in price range: $0 - $30.38 JUL Call Buy 2 @ 22.5 Sell 4 @ 25 $475.00 $875.00 Outperforms Stock Ownership in price range: $0 - $29.88 JUL Call Buy 2 @ 20 Sell 4 @ 22.5 $725.00 $625.00 Outperforms Stock Ownership in price range: $0 - $28.62 SEP Call Buy 2 @ 30 Sell 4 @ 32.5 $25.00 $1925.00 Outperforms Stock Ownership in price range: $0 - $35.12 SEP Call Buy 2 @ 27.5 Sell 4 @ 30 $225.00 $1625.00 Outperforms Stock Ownership in price range: $0 - $33.62 SEP Call Buy 2 @ 25 Sell 4 @ 27.5 $250.00 $1150.00 Outperforms Stock Ownership in price range: $0 - $31.25 SEP Call Buy 2 @ 20 Sell 4 @ 25 $125.00 $1025.00 Outperforms Stock Ownership in price range: $0 - $30.62 SEP Call Buy 2 @ 22.5 Sell 4 @ 25 $550.00 $950.00 Outperforms Stock Ownership in price range: $0 - $30.25 SEP Call Buy 2 @ 20 Sell 4 @ 22.5 $925.00 $825.00 Outperforms Stock Ownership in price range: $0 - $29.62 DEC Call Buy 2 @ 32.5 Sell 4 @ 35 $112.50 $2512.50 Outperforms Stock Ownership in price range: $0 - $38.06 DEC Call Buy 2 @ 30 Sell 4 @ 32.5 $200.00 $2100.00 Outperforms Stock Ownership in price range: $0 - $36.00 DEC Call Buy 2 @ 27.5 Sell 4 @ 30 $300.00 $1700.00 Outperforms Stock Ownership in price range: $0 - $34.00 DEC Call Buy 2 @ 22.5 Sell 4 @ 27.5 $125.00 $1525.00 Outperforms Stock Ownership in price range: $0 - $33.12 DEC Call Buy 2 @ 25 Sell 4 @ 27.5 $525.00 $1425.00 Outperforms Stock Ownership in price range: $0 - $32.62 DEC Call Buy 2 @ 20 Sell 4 @ 25 $350.00 $1250.00 Outperforms Stock Ownership in price range: $0 - $31.75 DEC Call Buy 2 @ 22.5 Sell 4 @ 25 $725.00 $1125.00 Outperforms Stock Ownership in price range: $0 - $31.12 DEC Call Buy 2 @ 20 Sell 4 @ 22.5 $1150.00 $1050.00 Outperforms Stock Ownership in price range: $0 - $30.75 JAN Call Buy 2 @ 35 Sell 4 @ 40 $250.00 $4150.00 Outperforms Stock Ownership in price range: $0 - $46.25 JAN Call Buy 2 @ 30 Sell 4 @ 35 $450.00 $3350.00 Outperforms Stock Ownership in price range: $0 - $42.25 JAN Call Buy 2 @ 20 Sell 4 @ 30 $50.00 $2950.00 Outperforms Stock Ownership in price range: $0 - $40.25 JAN Call Buy 2 @ 25 Sell 4 @ 30 $650.00 $2550.00 Outperforms Stock Ownership in price range: $0 - $38.25 JAN Call Buy 2 @ 20 Sell 4 @ 25 $1050.00 $1950.00 Outperforms Stock Ownership in price range: $0 - $35.25