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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: Resry who wrote (9035)	11/14/1998 12:17:00 PM
From: Herm	Read Replies (1) \| Respond to of 14162

Hi Rsry, Welcome to the forum and I will attempt to answer your question. Although, it may not be too accurate or the best solutions since you left out some critical data like what is your net cost basis (NUT). That figure would also take into consideration how many CC premies you have been able to keep after commissions. Net/Net in other words! Since, this is a learning forum or case study I will review some items for the sake of our regulars and lurkers out there. Here is the chart for AOL which is an internet stock. That group has been a rock n roll group not for the faint of heart. In other words, know how to play the game and have a tool shed of strategies in order to not get burned! With that said, let's look at the fundamentals and other possibilities. askresearch.com AOL P/E I don't have to tell you that AOL is overpriced and the upside price potential from here is a little over nil! A growth rate of 47.47% and a P/E of 126.1 is more like a pyramid waiting to crash! NYSE: (AOL : $140) (AOLw : $70 3/16) $28,815 million Market Cap at November 13, 1998 Ranks 863rd in the Fortune 1,000 on Revenue & 808th on Profit. Employs 5,800. Trades at a 20% Premium PE Multiple of 126.1 X, vs. the 105.4 X average multiple at which the Internet Access Providers SubIndustry is priced. I take it you are worrying about the November expiration which you left us little time to work out our usual magic touch. It seems you think AOL is going up and you want to keep the stock! But, that 120 AOL NOV. CC you sold @ a mere $4 (when the stock was at $111.00) is now @ $20 for that call. By the way, when AOL was $111 and you sold that CC the RSI was nowhere near a peak. In other words, you missed the clue that AOL was hardly ready to peter out. We use a tag on the BB along with the RSI as our timing marks. So, you want to cover at a lost. Well, if that is the what you want then do yourself a favor and eat $20+ or less but immediately write another CC for the AOL 120 JAN00 LEAPs @ 48. That will give you plenty of time, money and I think you will find that AOL is going to split or dive in price soom time soon! The CBOE index VIX continues to drop which usually means a major market downturn correction. You can bet those fund managers will be jumping out of AOL faster than you can say covered calls. So, $48 - 20 cc to cover = $28 worth of protection covering and selling the LEAPs as CCs or the $28 in your account greater than $160 - $111.00 = 49.00 if you are called out? Let us know what you do and the outcome Resry! Thanks!