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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: Herm who wrote (10622)	5/3/1999 10:41:00 PM
From: David Wright	Read Replies (1) \| Respond to of 14162

Hey Herm...sounds like "dead cat bouncing" to me. Didn't our favorite guru, Wade Cook, coin that one? Or, maybe he just stole it. There's a nice article in Stocks & Commodities about electronic day trading too. Gent named David S. Nassar. What you are talking about is a great recovery technique too for stocks that you already have covered, that tank on bad news. My theory is that if you pick stocks with good fundamentals, the market grossly overreacts to bad news, and the stock often drops near book value for a very short while..like only minutes, sometimes. You catch it down there, double or triple your position, sell your protective puts, buy back your CC, and wait for it to bounce back up. Then you can sell another CC, or just wait to sell your averaged down stock, all at a nice ROI overall. Gotta be quick though, and have it all planned out to get those orders placed. Even laying in a GTC on the cheap buyback of the CC can save time when you need it. By the way, I don't normally advocate averaging down as a strategy, except in a bounce situation. This is one of those strategy things you have to decide to do in advance. It takes serious nerve otherwise to watch a stock you bought a week ago go to less 1/2 what you paid for it, and buy more of it as a "defensive" move. If it's planned, and you have the discipline to stick with your plan...then you just do it, and think about it afterward. In fact, you REALLY think about it afterward if you triple your position...and it stays tanked. If you use a real time quote streamer, like DATEK's, you can see the gap down before the open. Either before-the-open trades, or bid/ask adjustments reflecting what's in the book already from overnighters sticking their dumb market orders in the que. Course, I expect all you folks with high powered trade stations and fancy feeds and level II are way ahead of me on this one. DATEKs little streamer is free though....