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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 (7916)	7/21/1998 7:06:00 PM
From: CCWriter	Read Replies (1) \| Respond to of 14162

Herm, What are the settings you use for Bollinger bands: Length Standard Deviation RSI: Length Thanks, blaine

To: Herm who wrote (7916)	7/21/1998 10:55:00 PM
From: Tom K.	Read Replies (1) \| Respond to of 14162

Herm, nice synopsis of the approach. For me, when I have case #2 ("price is bottoming (price touches lower BB and low RSI) and on the verge of recovery and the price is (I)ncreasing"), I sell OTM PUTs. This has been a nice money maker this past year and if I finally do get put the stock, I turn around and do the CC's until I get called out. I think that your fundamental approach is excellent.... we just all tailor it a bit to our personal style. The goal is to make profits, right? Keep up the good work of maintaining this thread. Using myself as a gauge, there are a lot of lurkers that are learning from all this sharing. Tom

To: Herm who wrote (7916)	7/22/1998 4:55:00 AM
From: Tony B	Read Replies (3) \| Respond to of 14162

Hi Herm, I noticed the following: Compaq Computer (CPQ) closed @ 32 9/16 Tuesday. For argument sake lets call this 32 1/2. With the stock price resting right on the 32 1/2 strike why is the August 32 1/2 CALL (CPQTZ) trading at 1 11/16 x 1 15/16 while the August 32 1/2 PUT (CPQTZ) only trades at 1 5/16 x 1 3/8? Why the large disparity in price with the stock right on the 32.5 strike? I am not new to options and have noticed that in a case like this the call will sell for maybe 1/8 or so more than the put but isn't this spread excessive? Could it be telling us something? Any insight you or anyone else can give would be appreciated. Good luck TB

To: Herm who wrote (7916)	7/23/1998 6:53:00 PM
From: Herm	Read Replies (2) \| Respond to of 14162

HOW TO WRITE COVERED CALLS - AN ONGOING REAL CASE STUDY! CC TECHNICAL CHART REVIEW! "Good educators must learn to be guides by the side, rather than a sage on stage!" Ok! Here we go! At the end of this review you all have a homework assigment! See how much you've learned! GLM Volume increased over 25% of normal volume, very low RSI 30%, spike downward into the lower BB. Stock should reverse tomorrow! Check out the settings in the chart. Notice the slant direction in the RSI and chisel RSI dive. That really drives up the premies in the CCs folks. If you owned GLM you would cover your CCs, cash in your PUTs with a heck of a big smile on your face. The current price is a two year low for GLM. What a ride with this stock. But, you can see that CCing would have kept you in the ballgame while others are bleeding real bad. You have the CC tool shed to use! The P/E is only selling about a 13% discount so there could be more downside down the road unless GLM pulls a miracle out of the hat or Iran bombs the oil fields or something! bigcharts.com BTGC - Current CC $ Play Toy! Easy going BTGC is nice tame stock for CCing. I sold (recent peak in the RSI and tag in upper BB) my poor call buyer 7 contracts for the Jan. 7.5 @ 1.75 and those suckers are only worth about 1 1/8. I figure I will dippity do (close to cover CCs) at around 3/4 before the predicted BTGC price reversal at around $6.75. That means I get to keep a solid point for my troubles. I don't have to wait until January to make the balance of my CC premie which is only 3/4. Does it make sense to hold out (not cover or allow CCs to expire) until January for 3/4 points when I can most likely make at least 3 points between now and then CCing? How do I know BTGC will bounce around $6.75? Hey, I'm no mind reader, but, I can look at the chart (even with my poor vision) and see the lower Bollenger Band level at approx. $6.75. That means most likely a swing in price for a fraction of the trading day before block purchasing kicks in! I tried to buy 10 BTGC Oct. PUTs @ 3/8s when I wrote the 7 CCs with the premie dollars. No bites! Next time I will short the stock if no PUTs are being sold. That is the lesson I learned this time around. Otherwise, here is the fantastic math: $37.50 (3/8s) x 10 = $375 cost for the PUTs as a sideshow using the $1,225 CC premies from my partner the call buyer. I love to make my CC buyers pay my way you know! Folks, 10 BTGC Oct. 7.5s PUTs are worth 7/8s by 1 1/8s as of today. So, let's say they are worth $1.00 x 10 = $1,000. I just think it's great when anytime you can take CC premies and make money as the stock goes downward. WHY IN THE WORLD WOULD I WANT TO HOLD the CCs until Jan. 1999 when you rack in the bucks every month by using our CC tool shed? Friends, please look at the chart and notice the conditions when the price extremes occur! That's when you make the best returns. There is really no guess work if you apply the obvious in the RSI and BB indicators. bigcharts.com OUR FIRST STOCK (ROST) ON THIS FORUM: ROST gave the $49 gun salute to people's money today! I had to grin since the stock split last year at 2-1 for one at $48 and here it is back up to at least $49 twice in the past 6 months. What a tool folks! Same old story I'm trying to point out over and over. On this forum, we have discovered and evolved with a powerful and simple story teller. I'm only following the script as presented by the technical indicators. In fact, I'm no smarter than you and the next man or woman. ROST price peaks and tags the upper BB and that RSI drops like a rock and the price goes down the toilet on profit taking. The MMs and fund managers do it again! Course of action if you owned ROST during this event? Remember Withdraw Increasing Neutral (W.I.N.) ? Remember, where you read this first just in case Wade Cook starts to use it in his books. :-) 1. This is the W part! As the stock price is increases and is about to WITHDRAW (peak RSI and tag of the upper BB) sell CCs at or deep in the money two or more months out! GRAB THE CC PREMIES and run. That is your working capital to leverage folks! 2. Load up on CHEAP PUTs one or two months out at a strike price slightly below the current stock price! Remember, CHEAP and lots of those suckers. You would be suprise how fast they can add up! This is your downside insurance policy which will keep you net cost basis down (NUT). 3. Consider shorting the stock if you are comfortable with the technical indicators or do both! 4. Sit back and enjoy! bigcharts.com That's it for now! Some really good review examples of the stages of CCing with our W.I.N. (W) waiting for the price top & reversal before withdraw, (I) waiting for the bottom & reversal before increasing! (N) doing nothing but waiting for bottoming or increasing until extreme is reached. PS - Some email writers have asked me, "how long does it take before the reversal?" Look at the distance between the Bollinger Bands for clues. The farther apart and more time it generally will take! Earnings and news events could shorten those points (length of time) or expand those points. There is a certain amount of safety if you only read the charts and determine the best time line for your stock. They are ALL different! Bottom line! Time is working on your side as a CCer and against your call buyer(s). The cards are really stacked against them if they are not using our tool shed! YOUR HOMEWORK ASSIGNMENT:This stock was hit with a negative surprise event. Review all the news, look at the chart indicators below. Reply to this message in a narrative format indicating: 1. When you think the stock will bottom? (Hint - apply the CC W.I.N. rules) 2. What could you do now to take advantage of your CC knowledge and RSI & BB chart skills? 3. Indicate the likelyhood of a long term upward or downward price trend. (hint - slanted angles) 4. What web site would you use to gather and monitor the stock. What tools would you use? bigcharts.com Wishing you all! The best of good buys!