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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: nlam who wrote (8175)	8/10/1998 5:27:00 PM
From: Herm	Respond to of 14162

Ok nlam, The example you are using with DELL is true. If you had picked up 100 shares of DELL at 107 1/4 ($10,725) and sold a CC for the DELL AUG110 @ 10 1/4 you would have $1,025.00 (CC premie $) more in your account. Also, since DELL moved up 3 points today you would most likely be called out at $110 per share. Your total gain would amount to $1 1/4 (CC premie)+ $2.75= $4 ($400 less commissions - 3.7% unmargined 7.5% margined). Now, the AUG110 strike price (DELL at $107) when you first wrote the CC on Friday would not have been "in the money." That part of your statement the last time was not 100% accurately stated. If you recall, you said: "I have noticed that one could buy just about any stock and sell in the money calls for a higher price than the purchase price of the stock, has anyone done this will regularity??" nlam, just so we don't confuse anyone out there! Perhaps you meant you could buy an out of the money call for a smaller up front $$ premie and still get a higher buy out stock price IF you are called out! Yes, you are correct. You could do that on a regular basis if you are using out RSI and BB indicators to help you pick those stocks that are in an upward cycle. PS - The DELL LEAPs would have produced a much higher CC return since you can own them for much less money. Say, $8,800 per LEAP vs. $10,000 for the stock!