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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: Cesare J Marini who wrote (9041)	11/15/1998 2:58:00 PM
From: Herm	Respond to of 14162

Well, that's a fair question. It follows the same recommendation as for normal CC out a few months. In summary, go out a few months to grab as much money as you can in CC premies. If you go at or in the money you can protect a much greater downside. Allways clear your CCs by covering (I use to say, when it dips you do what? dippi do!) when you can retain the majority of you CC premie. Note, the dropping RSI and lower BB tags are usually right in line with the price decay of the CCs. Usually, 80% to 90% of the call value is gone and is yours forever! So, writing the SUNW CC LEAP for the year 2001 would yield 27 2/8s just about. That, sure gives you some serious downside protection. Of course, you are not going to wait until the year 2001 Cesare. What you are looking for is the lower tag of the BB and a dropping RSI. When that happens you would cover that LEAP CC. It might give cost you $20 and you get to pocket $7 for your troubles plus the interest in your account for the LEAP cash. The important point to remember is that $27 CC premie in your pocket protects you bigtime against a wipeout! Your portfolio remains basically neutral even with the drop in the stock price. Also, if you use the CC LEAP premies for sideshow PUTs you will actually make money off the drop. Now, that is how to use the volatility to your advantage and past on the risk to your CC LEAP buyer(s).