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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: tuck who wrote (10107)	3/28/1999 5:21:00 PM
From: Dan Duchardt	Read Replies (2) \| Respond to of 14162

Since I helped start this conversation, I'd like to continue to express my thoughts, but a bit of self disclosure is in order so that all of you know where I'm coming from: I have never bought or sold and option contract in my life. That will change soon. My views are just my thoughts based on my attempt to integrate what I know and what I am learning here into an effective trading strategy. If my thinking is wrong, I expect and welcome rebuttal from the experts. I find the notion of entering a NET order as tuck has described it an appealing way to open a CC position. I understand that it not as good as buying the stock at the optimum low price, and selling the call after the price improves, but it does offer protection against further price erosion after you go long the stock. However, I think it is a fair observation that stock prices ordinarily move faster than the associated option prices. So if the stock price rises one is not going to do better than the currently available NET (which I will define as the current stock ask less the current call bid, since at any moment in time that a broker executes both orders that is what I should easily get). If you think the stock price is going up there is no point asking for a lower NET than what is available right now. Now if you are anticipating a bottom (because say the stock price is approaching the lower BB and the RSI is near 30, the WINS way I believe), then asking for a NET based on the expected turning point of the stock, and your estimate of the call price at that turning point, could be an effective way to enter a limit order to open the CC position while allowing for some uncertainty in the turning point. I think this would be particularly useful if you were interested in a stock that is sitting near a call price that does not offer enough upside potential if you get exercised, but selling the next higher call price to improve your potential does not offer enough downside protection. If you can predict the call price when the stock falls to a point in between the strike prices, where there is an acceptable balance between potential and risk, then if the stock drops you will have a position you would like. I do wonder about this statement from you tuck Of course, on the NYSE there is no bid/ask for a stock. I don't believe that is the case. Certainly the mechanism for trading NYSE is different from the NASDAQ, but still there are prices people are willing to pay to buy, and prices people are willing to sell at. Those prices and quantities are posted by the specialist as he is executing transactions for people who are willing to buy up at the ask or sell down at the bid, or matching orders that are in between. Maybe I am missing your point.