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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 (10652)	5/8/1999 11:39:00 AM
From: jebj	Read Replies (3) \| Respond to of 14162

>Now, if you can get live feeds with this data you are in business for daytrading CCs provided there is enough open interest on the stock. - Herm I am presently using 1 min charts, volume, RSI and STOCKASTICS with three plots on it - slow, medium and fast - from a live feed into INVERSTOR R/T. The STOCKASTICS will show the direction change much faster and you then back it up with the RSI. If you use the RSI only, by the time it indicates a move, the move may be over! However, IF this is happening, you probably shouldn't be working with this stock. This combo works great but you need a stock that moves intraday at least 2-3 pts - and more is better - just to cover the spread as even on the high flying internut stocks, the options are slow to move against the stock and lag behind it - - sometimes takes a 2 pt move in the stock before the option price will move. I first tried this with IBM but found that it was only moving in a 1-1 1/2 range - - not enough to cover the usual 1/2 spread at it's volitity. Have now gone to AMZN due to the higher volitity and, therefore, higher swings - averaging about 10 pts a day up and down. Have found that the highest ROI is playing the strikes 2 OTM, i.e., when AMZN is at 140, playing the 160 calls and the 120 puts, depending on expecting the stock to rise or fall. As an example, with AMZN at 140 the 120 puts might be around 3, the 130's around 6 and the 140's around 12, - these are examples only, the real numbers are not quite doubles as you go up. However, a change in the stock may make a 1/2 pt change in the 120's, only a 3/4 change in the 130's and maybe only a 1 pt change in the 140's - a far greater ROI on the 120's. Compounding this, the spread on the 130's and the 140's is higher than on the 120's - many times as low as 1/8 - and need a higher investment as well. Interestingly, the calls usually run a higher spread than the puts for some reason so making a buck on the calls is harder than on the puts, it seems. As you can see, IF - a very big if - one hit either the high or low for a full 10pt move the ROI is substantial -- of course, if one MISSES it . . . However, if one does miss, with the stock swinging as it does, one can buy to opposite, ride it, and wait for the swing to come back - i.e., if one buys the puts and the stock starts up instead of the expected going down, to sell at that point - what with the spread, the slight move in quote and the commissions - would be significant on $3.00 options. Instead, just buy the calls, ride them up, buy more puts at the higher stock price and ride them down - hopefully back to where getting out of the original puts will be profitable or at least much less painful. Although I did not do so - sort of a "do what I say do, not what I do.", thing :) - in every single case in the last two weeks except one, if I had held the position instead of getting out the stock came back to my position. In hindsight, however, it would have taken some nerves of steel to wait it out and I don't think I would have done so. In short, it seems one needs very high volatility and a high priced stock that moves in 3 pt swings to make this work - the internut stocks are about the only ones that would be suitable, it seems. jb