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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 (9873)	3/4/1999 9:29:00 PM
From: Tom K.	Read Replies (1) \| Respond to of 14162

But how do you determine what point in time to sell the calls? Joe, I'm not sure that I'm understanding the question, so see if this response helps.... If I owned CSCO currently at 95, and didn't want to give up the stock for all the various reasons. I'd probably sell April 105 calls at 3 figuring that it wouldn't hit 105 within the month. If correct, I pocket the 3. If I guessed wrong and it does go above 105, it would have to go above by more then the then premium for the April 105 before anyone would bother to call me out. But as expiration day gets closer, if it's over 105 by an amount close to the then premium... I'm going to get called. Example: if the stock hits 110, the premium will be 5 (intrinsic value) at expiration and I will get called. So repair action is needed. I'd do this. Buy back the call at 5 (I sold it at 3 so now I'm down 2), go out to May and sell a 115 for about 5 (now I'm back up 3) and wait to see if it expires. Note that I get no income for that month. If it does expire, I pocket the 3 and start again. If it continues to rise, I again give up that months income and roll forward again. Each time I'm giving up the current income it's because I want the gain in the stock. This approach is OK if you need to hang onto the stock, but with a rapid riser, it doesn't generate cash until the issue moves into a basing stage. Hope this is helpful. Tom