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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: Dr. No who wrote (8967)	11/8/1998 2:12:00 PM
From: Herm	Respond to of 14162

Hi Mo, Those are two good two questions Mo! For the sake of new readers and lurkers out there, let review a few possible options. bigcharts.com

To: Dr. No who wrote (8967)	11/8/1998 2:57:00 PM
From: Herm	Respond to of 14162

Sorry, got cut off! 1. When the price tags the upper BB and the RSI is at a peak level for XYLN then sell the CCs three months out or more at the money or in the money and collect the largest dollar amount for the CCs. That is your working capital and XYLN hedge against a lost if the stock dumps. 2. Using the CC dollars you can do a sideshow with PUTs. That is, buy CHEAP puts and twice as many as your CCs. Example, sell 5 CCs then buy 10 CHEAP PUTs. What is cheap? Hey, what you want to buy. It is exactly like the deductable on your car. What can you live with if your stock dumps? If you are heavy margin I would say spend a bit more on the PUTs since you would suffer a bigger lost. Be conservative and don't get greedy and try to keep all of the CC premie dollars. 3. Cover your CCs when the XYLN price tags the lower BB and the RSI is bottomed out. Again, it will vary with each stock. Note, you will pay back much less than you collect from the CCs. They give you 3/4 and you pay back 1/16 sort of thing. That money in your account will give you more margin and will offset interest since it is considered same as cash in your account. Now, if you go for the sideshow PUTs, in the event of a dump you may actually make money on those PUTs and come out with all your original capital (breakeven) invested dollars and maybe a slight profit. Reason? You used the CCs $$ to buy the PUTs which means no money up front. The PUTs will gain value as the price falls. The more in the money the PUTs the sooner you breakeven. You can repeat this process as the stock does go down a great deal. I have done it as much as three times full rounds. Each time I sold deep in the oney CCs a few months out and picked up PUTs to cushion the drop! Covered the CCs and sold again in the money CCs. I guess I can name that process "walk the dog on a short chain." :-) The neat part is that your CC buyers will pay for your insurance with their money and not yours. Now, if the stock gaps upward? Do the opposite! Instead of cheap PUTs you would buy CALLs as sideshows using the CC premies! As the stock moves up the Calls will become more valuable! You could exercise your long sideshow calls if you are called out of your CCs. REVIEW Pull back? Write CCs at or in the money a few months out! Consider cheap PUTs one/two months out and twice as many as the # of CCs.

To: Dr. No who wrote (8967)	11/8/1998 2:57:00 PM
From: Herm	Read Replies (2) \| Respond to of 14162

Sorry, got cut off! 1. When the price tags the upper BB and the RSI is at a peak level for XYLN then sell the CCs three months out or more at the money or in the money and collect the largest dollar amount for the CCs. That is your working capital and XYLN hedge against a lost if the stock dumps. 2. Using the CC dollars you can do a sideshow with PUTs. That is, buy CHEAP puts and twice as many as your CCs. Example, sell 5 CCs then buy 10 CHEAP PUTs. What is cheap? Hey, what you want to buy. It is exactly like the deductable on your car. What can you live with if your stock dumps? If you are heavy margin I would say spend a bit more on the PUTs since you would suffer a bigger lost. Be conservative and don't get greedy and try to keep all of the CC premie dollars. 3. Cover your CCs when the XYLN price tags the lower BB and the RSI is bottomed out. Again, it will vary with each stock. Note, you will pay back much less than you collect from the CCs. They give you 3/4 and you pay back 1/16 sort of thing. That money in your account will give you more margin and will offset interest since it is considered same as cash in your account. Now, if you go for the sideshow PUTs, in the event of a dump you may actually make money on those PUTs and come out with all your original capital (breakeven) invested dollars and maybe a slight profit. Reason? You used the CCs $$ to buy the PUTs which means no money up front. The PUTs will gain value as the price falls. The more in the money the PUTs the sooner you breakeven. You can repeat this process as the stock does go down a great deal. I have done it as much as three times full rounds. Each time I sold deep in the oney CCs a few months out and picked up PUTs to cushion the drop! Covered the CCs and sold again in the money CCs. I guess I can name that process "walk the dog on a short chain." :-) The neat part is that your CC buyers will pay for your insurance with their money and not yours. Now, if the stock gaps upward? Do the opposite! Instead of cheap PUTs you would buy CALLs as sideshows using the CC premies! As the stock moves up the Calls will become more valuable! You could exercise your long sideshow calls if you are called out of your CCs. REVIEW Pull back? Write CCs at or in the money a few months out! Consider cheap PUTs one/two months out and twice as many as the # of CCs.