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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: NateC who wrote (10488)	4/22/1999 7:06:00 AM
From: sergio	Respond to of 14162

Let me hop in just to test my skills. To me B.E. is break even, and it meant if I bought underlying at $22 and received $2 for a $25 strike call sold, my BE is at $20. I didn't lose nor gained anything (other than interest cost of the $22 underlying with slightly offsetting on $2). To me anything above $20 at expiry would be profit. To me repair action is when underlying tanks and you take maneuovering positions to recoup or lower your cost basis further. Yes any upside beyond $27 at expiry is a missed opportunity on the upside. 5/22 for one month is near 24% return for a month which I will accept anytime, or 2/22 is certainly acceptable too. Let't not forget 10% in one month is pretttty nice. Too bad IRA accounts dont allow for buying LEAPS. sergio

To: NateC who wrote (10488)	4/22/1999 7:54:00 AM
From: Herm	Respond to of 14162

Nate, I was watching the NASA space shuttle lanches. At several points in the lift off sequence there are critical yes/no decisions to made. Like clockwork, you quickly assess and make a go or no go conclusion. Well, the CC B.E. is go/no go signal to act with long sideshows or covering your CC. Personally, I would rather go long on sideshows the majority of the time! The CC B.E. rule is a conservative approach that will always keep you in the black and reduce your risk! NASA does not take un-neccessary risk.

To: NateC who wrote (10488)	4/22/1999 12:59:00 PM
From: Hectorite	Read Replies (1) \| Respond to of 14162

Nate, I think your calculations are wrong. Excerpt from your scenario: "bought an underlying at 22, and sold the 25 call for $2...(Stock goes to 27)...pay $3 to cover...We now have the underlying at 27, and the full 5 on the runup.....but we've spent $3 in buying back..so we have a net $2 on the underlying...plus our original $3 premie....for a total of $5. It's the SAME, it seems to me." The original was 2, not 3. So here's what I get with stock at 27. Do Nothing: +3(stock)+ 2 (short prem)=+5 cover: +5(stock)+ 2(short prem)-3(cover prem)=+4 (worse than doing nothing) Roll up and out: 5 + 2 -3 + 2(assumed)=+6 Now if it goes up to 30 you make out best by rolling (8+1(net prem)=+9), but you raised your downside protection level up to 21 form 20. If the stock went from 22 to 27 in a short period the technical support levels might have well shifted up too so that giving up a little protection may not be a big deal, depends on the stock of course.