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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: Petrus who wrote (8373)	8/26/1998 8:42:00 PM
From: Caroline	Read Replies (1) \| Respond to of 14162

Petrus, I am asking many of the same questions. I've been looking at the following: tscn.com tscn.com tscn.com tscn.com tscn.com tscn.com Generally you want to sell the next month out. We'd be selling September. But if you know you're going to sell again in October, why not save the extra commission and sell October now? It's the difference between 6.25 (September) and 11 (October) and 14 (November). And there's the answer. If I can get 6.25 for one month, I want 12.50 for two months and 18.75 for three. So I stick with September on the 130. But it's much better at the 140 strike: 2.75 (September), 6.25 (October) and 10 (November). If I can get 2.75 for one month, I want 5.25 for two (so 6.25 is cool) and 8.25 for three (10 is just fine). The 140 strike has another strong appeal: I don't want to sell my DELL, I just want to use it to generate covered call profits. With the split coming up and the damn thing roaring through barriers at $4+ per day, it'll pass $130 before the third Friday in September. Maybe 140, too. After all, that's only $70/share post-split. So I eliminate the 130 strike because the shares are too likely to get called. At 140, the 2.74 premium for September seems low in comparison to what DELL's generated for me in the past. That leaves October 140 or November 140. These are both excellent returns. Now the only demon is how in the middle of "crash time" those expirations live. Good luck, CB

To: Petrus who wrote (8373)	8/27/1998 7:40:00 PM
From: Herm	Read Replies (1) \| Respond to of 14162

Hi Petrus, We know what DELL did today as of this writing. It went down! Now, I want to ask you some probing questions! That is how we all learn before we lose out money. 1. What makes you think DELL will reach $130? Are you using subjective reasoning like the flip of a coin? 2. If you are so sure (by the technical indicators you are using)DELL is going to reach $130 why not just buy straight calls or stay where you are? Here is why I would be nervous if I had 1,000 shares of DELL with a profit and just sitting around. DELL P/E Overvalued DELL will drop like a rock faster than it took to triple this year. MMs and funds will exit by shorting the stock to lock in profits. That is the law of the jungle! Keep watching DELL drop if this major correction continues! NASDAQ: (DELL : $125 1/16) $81,650 million Market Cap at August 27, 1998 Ranks 174th in the Fortune 500 on Revenue & 156th on Profit. Employs 10,350. Trades at a Premium PE Multiple of 60.7 X, vs. the 26.0 X average multiple at which the Computers SubIndustry is priced. Notice the chart below. Upper BB has been tagged and RSI is very high. DELL is prime for a downward cycle! bigcharts.com Now, with that information in hand I would have jumped on CCs for DELL 130 NOV. @ 14 1/4 x 10 = $14,250 in CC premies. Now, DELL closed lower today and those 130 NOV. calls are worth 1 3/8s less as of the close. You had a total of 14 1/4 points worth of downside protection before it starts to tap your pocket. Now, I now you will say, "but, what if, what if, what if DELL starts moving up. I will lose the gain!" My friend, you have over $14,000 dollars in your account to buy LEAPs or CALLs to make even more money! You are better off owning the LEAPs anyway! You can control twice as much DELL stock and write twice as much CCs. Take a look at the Nov. 14 call plotted on the chart with a Bollinger Band. The odds are on your side that you would cover that CC at $6 when DELL bottoms at $90. I would venture to say DELL will drop below $110 from here! tscn.com And think of the DELL 90 SEPT PUTs @ 1/2. You could buy 50 of those sucker for some nice change as DELL drops. You might be able to cash out at 2 1/2. tscn.com Please read a few post back for some trading CC rules to consider.