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Strategies & Market Trends : Are you considering quitting your dayjob to daytrade?! -- Ignore unavailable to you. Want to Upgrade?

To: Kevin McKenzie who wrote (296)	1/20/1999 9:02:00 PM
From: john o	Read Replies (2) \| Respond to of 611

<<(3) When a stock moves up, you are forced to watch "from the sidelines". You do not get the benefit of any move beyond the strike price of the option you sold.>> I haven't traded options and am hesitant to do so, but ... If the price starts moving down, couldn't you just sell short to protect yourself against the losses until the option expires? There would be some margin cost but it would probably be cheaper. If the price moves to the strike price, why not just immediately repurchase the stock? John

To: Kevin McKenzie who wrote (296)	1/22/1999 12:34:00 PM
From: jebj	Respond to of 611

>I tried selling covered calls for over a year (a la Wade Cook). I was plagued by several problems: - Kevin About the first thing one learns as they proceed down the road to "option education" is that the roadside is littered with the dead bodies of Wade Cook followers. As for you examples, one must first fall back a little and answer the most important question one has when looking to make a position in stocks, options - whatever - that question should be, "what do I want out of this move?" One should NEVER go into a position before knowing where one is going to get out - within reason, of course. One would certainly ride a winner but to sit and watch a good profit go away is just incompetence in knowing what you are doing and what you want. As for covered calls - they are NOT used as a day or shortterm trading tool. They should be used on stocks on which you are going to hold longterm and - despite what Mr. Cook tells you - on stocks that move very little. When used in this manner, one sells a call for a small premium, pockets the money and, when they expire, do it again. Done in this manner, you underlying stock become a monthly "cash cow". If one turly whats to hold a stock that goes up over the strike price, one either buys the call back - at a small loss - or allowes the call to be excersized and then buys the stock back on a small drop. One does not sell a call on a fast moving stock UNLESS ONE IS WILLING TO ACCEPT THE PRIMUM AS HIS PROFIT ON THE PLAY. ie, I am HAPPY to make $5.00/share profit on this stock. If the stock then goes up 1000 pts, so what? I made my decision on what I wanted BEFORE going in. As for the stock falling, so what? IF you sold a call on a stock you were going to hold, you have lost nothing - but, in fact, have money in your pocket you would not have had if you had not sold the call. Options are NOT a subsitute for daytrading - they are a completely different means of arriving at the end result we are looking for - profit. Used properly - and understood - the leverage AND SAFTY available in options is something every trader should understand. Not understood or used improperly and they can be deadly. CC's are somewhat like a daytrader "picking cherries" - a little bite at a time. They are not big money makers and those that try to use them in that manner will get hurt - not from the CC as you, in fact, CAN NOT LOSE ON THE CALL, but on losses on the underlying stock if one did not intend to hold said stock. Take the info from Wade Cook and now read McMillans books. They are the "Bible" on options and although VERY dry and dull, an excellant place to START ones education on options. jb