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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Mike Gordon who wrote (82483)	11/27/1998 9:34:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Mike, to bring you up to date, the debate I have been having with Geoff is whether it is more profitable to invest by selling short term covered calls or longer term calls covered calls. I have contended that the shorter term calls are much more profitable. Geoff argues that the models predict equal returns, and that when he takes into account transaction costs, the longer term calls are marginally more profitable. I pointed out that my actual return using this approach has been well in excess of the risk-free rate of return (by almost an order of magnitude). Apratim has argued (and I agree) that the choppiness in implied volatility derived from the Black Scholes model indicates that the game is not "fair". I hope this fairly states everyone's position. What are your thoughts on the relative rates of return (short term calls vs. longer term calls)? TTFN, CTC

To: Mike Gordon who wrote (82483)	11/27/1998 10:21:00 AM
From: robbie	Read Replies (1) \| Respond to of 176387

I don't mean to be overly simplistic, but as one pretty smart dog says, there may be less to this than meets the eye. I sell covered calls every month also, and it is clear to me that selling them every month results in a much higher rate of return than selling them six months out twice a year. One example - today the Dell Dec 65 call is bid at 3 1/8, while the May 65 call is bid at 11. Getting 3 1/8 per month will net me 18 3/4 for six months. Since 1/4 of the life of the Dec 65 has expired, while only one week out of 26 has expired for the May 65, the spread would have been even more in favor of the Dec call last week. I always sell my calls the day after the prior month's calls expire. Since I preceive the market to be overvalued at this time I am selling calls that are not as far out of the money as the ones I would sell normally. It's been working well. I'm raking in about 1k monthly for every 20k in my short-term account. I don't sell the calls on my long-term account. Hope this helps, comments/suggestions welcome. Robbie