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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: RayV who wrote (8873)	10/22/1998 5:21:00 PM
From: Herm	Read Replies (2) \| Respond to of 14162

Hi Ray, ROST UPPER BB TAG & HIGH RSI ALERT! I set the RSI setting to 8 days avg. vs. the more typical 14 days to get a better feel of the relative strength in ROST. It is up there at this point and just about ready to a tag. If I recall, your nut must be very low? Take a look at the RSI is starting to level off and may peter out soon. The volume has been dropping off fast and ROST continues to creep up. You could write CCs at any point from here on. If you can watch the stock during the day, then fine milk ROST up. If you can't baby the stock then set a reasonable limit sell for the CCs and wait. Now, I'm talking about 1/4s to 3/8s points upwards on the calls not 3/4s to 7/8s. You may be left holding the bag. Remember, "a bird in the hand is worth two in the bush." If you take a look at the ROST overhead price levels ($38, $44) you will understand that those at the $38 mark will dump when ROST reaches that point. For those who rode ROST up from the $23 bottom to the current $38 they have a very nice profit! You know the money will be taken off the table soon! Lock in those CC premies and grab a large haul by going out a few months and one or two strike prices down. POSSIBLE CC Strikes and Month If you feel conservative then the ROST 35s FEB. @4 1/2+ will do the trick. If you understand the W.I.N.S. approach then go for the ROST 30s FEB. @ 7 3/4s or 30s NOV. @ 6 5/8s. Remember, you are going to cover later anyway! This is your downside insurance (hedge) money! Those premie dollars are also working capital in your account! That money that will reduce your margin interest and/or can be used to buy cheap PUTs as an additional sideshow! That's more money in your pocket as ROST pulls back! And finally, you can buy more stock to average down and write more CCs W.I.N.S. Review So, we have a [I] increase turning into [W] withdraw soon based on the historical upper BB and RSI readings. We have two visual recent price drop points as a chart reference. Pull back when it comes should take ROST back down to at least $28 to $30 before any kind of reversal. The indicator to watch for as a possible bottom is the lower BB as it rises upward when ROST pulls back. The bands enlarge and contract as the stock moves up and down. Right now, there is more volatility in ROST. The BB bands are far apart So, the CC premies are higher than normal. The 20 day volatility reached 100.1% askresearch.com QUICK ROST FUNDAMENTALS REVIEW ROST stock is still undervalued. With a annual growth rate of 14.5% and a P/E of 13, ROST remains a fantastic conservative CC workhorse! NASDAQ: (ROST : $35 3/4) $1,703 million Market Cap at October 22, 1998 Ranks 635th in the Fortune 1,000 on Revenue & 619th on Profit. Employs 14,855. Trades at a 48% Discount PE Multiple of 13.0 X, vs. the 25.2 X average multiple at which the Discount & Variety Stores SubIndustry is priced. ==================================================================== FORE TURNED INTO A KAHUNA! Real nice action in FORE. Scott and Dazzled jumped onto this kahuna at around $10 and FORE is now at $15. Besides, I believe they went with the LEAPs which means they only paid $5.50 or so! It does not seem impossible for FORE to reach $20 before any pull back! WOW! That first round of CCs will be a monster! Or maybe they will short the stock and sell off the LEAPs. If all goes as planned, those two folks will be getting the Kahuna of the Month Award along with the ROST play from $23! NICE PROFITs! askresearch.com