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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 (10490)	4/24/1999 1:30:00 AM
From: Dan Duchardt	Respond to of 14162

NSOL Update: I've been trying to get a feeling for the "breakeven" concept by following Nate's line of discussion, and I just posted a reply to his last note on that subject. I don't think I've quite got it, but by Herm's definition I was well above breakeven on the NSOL position, and had probably missed the time to do something with the position. Nevertherless, a few minutes before dragging myself away from my computer for a little trip yesterday, it suddenly hit me that there was profit sitting on the table to be taken far in advance of the expiration dates of the calls I had written. I probably missed the optimum time (when NSOL was around $102), but about noon yesterday, I unwound my NSOL position, taking big losses on the short call positions, and taking the bigger gain on the underlying. I was motivated by the belief that NSOL would retreat after the big runup on Wednesday, and the notion that a clean quick profit in a few days was preferable to a potentially higher, but uncertain profit six months down the road. 4/21 1400 (400 + 1000) NSOL bought and sold at a profit of $3400 2600 NSOL @ $63.5 $165,100 8 Jul 65c @ $14.5 -$11,600 8 Oct 65c @ $20.75 -$16,600 10 Oct 70c @ $19.125 -$19,125 26 May 60p @ $ 3.625 $ 9,425 _________ ________ $174,525 -$47,325 = $127,200 ==> NUT=$48.92 for 2600 4/22 1400 (400 + 1000) NSOL bought and sold at a profit of $3400 2600 NSOL @ $90.75 -$63.5 $235,950 -$165,100 8 Jul 65c @ $14.5 -$35.625 $ 11,600 -$ 28,500 8 Oct 65c @ $20.75 -$43.125 $ 16,600 -$ 34,500 10 Oct 70c @ $19.125 -$40.875 $ 19,125 -$ 40,875 ________ _________ $283,275 -$268,975 ==> $14,300 I'm still holding the May60 puts (26 contracts) that cost $9,425, now worth $8,450. I'm surprised they are not worth more than I paid since NSOL has given back over $10 from where I bought them, but I expect to get out with little additional loss, or perhaps even a profit. It seems the mere 9 point range in today's NSOL price has weakened the volatility value in the premium to the point that the put price declined even as the stock price declined. Seems like a really strange inversion, but obviously such things do happen.