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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: Dan Duchardt who wrote (10091)	3/27/1999 12:58:00 AM
From: tuck	Read Replies (2) \| Respond to of 14162

Dan, I don't know where the idea of getting the call sold at ask came from. You specify a net position. If a stock is selling at $50 and the call is selling for $4, an investor can specify a position of net $46. So if the stock moves before your order is executed, you still pay $46 for the transaction if the stock goes to 50 1/8 and the option goes to 4 1/8. You get that kind of delta from in the money or at the money options. Fast execution increases your odds of getting this net in a volatile, fast-trading stock. Stocks with low trading volume are easier. Trying to sell near ask should make the order unlikely to execute, so when I say "is selling for $4," I mean your net is computed from some price very close to the bid. You sacrifice the ability to shave a few sixteenths for the security of not getting burned trying to leg into the position one transaction at a time. That's my understanding, anyway, based on McMillan. It's probably yours, too. I agree the order is not likely to be executed if the you compute the net based on the ask of the sold call. Cheers, Tuck