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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: Terry Maynard who wrote (7715)	6/20/1998 11:04:00 AM
From: Herm	Read Replies (2) \| Respond to of 14162

What happens when the gap starts to occur with the CC? You have a choice. Either cover and roll up or do what I would do. If a stock is taking off, something unexpected took place and you are losing out $. I would rather enter into a recovery spread by completing the second part of that strategy. That is, buy half as many (of the number of CCs) at a lower strike price long calls immediately! The value of your portfolio will be growing as the CCs gaps upward, so, you should have the value in the extra margin. You could do additional recovery (credit/debit) spreads on the same stock. That is, sell short CCs against long calls. As long, as you pair them off your only limitation is the cash value on hand. If the stock slows down you cover your short positions and cash in the longs. You may be able to still hold on to your original CC long stock position. PS - SOC seem real pricey at this point! I would rather short SOC than try to make money CCing. I will look up the short interest today in Barrons. It will be a lonnnnnngggg time before SOC gets it act together. NYSE: (SOC : $11 1/4) $967 million Market Cap at June 19, 1998 Ranks 792nd in the Fortune 1,000 on Revenue & 320th on Profit. Employs 9,000. Trades at a 14% Premium PE Multiple of 21.1 X, vs. the 18.5 X average multiple at which the Appliances SubIndustry is priced.