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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: Caroline who wrote (8209)	8/14/1998 2:11:00 PM
From: Scott	Read Replies (2) \| Respond to of 14162

Caroline, I'm no expert on this either, but the way I did it yesterday was to buy LU stock at 88 1/2, and sell Sept. 80 calls at 10 3/8. (I probably could have gotten a little more for the calls, but the stock started dropping). So, that's an almost 2 point difference in value (10 3/8 - 8 1/2, where the 8 1/2 is 88 1/2 - 80). As long as LU stays above 80, I will get called out in September and keep the 2 pts. If it drops below 80, I still have a 2 pt cushion down to 78. I also confirmed this against Doug's Stock Emporium. Just calculate what I spent, what I took in from selling the calls, and what I will get back when the shares sell for 80. (The 85's had a better gain, but I wanted to stay pretty far in the money.) Can anyone tell me if there is a chance that I'd get called out before expiration? Someone holding an 80 might decide to exercise. If this a common occurrence? I'd like it to happen so that I can use the money again. Scott >I must not be understanding you. >> Lucent Sept. 80 calls. Stock price is 86, Calls are 8 1/2 x 8 7/8. >The Sep 80's have $6 intrinsic value and $2.5 "time" value. >If the calls were 90x91 and the stock was 86 I'd see your point. >CB