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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: Teresa Lo who wrote (10734)	5/11/1999 6:39:00 PM
From: KFE	Respond to of 14162

IS.COM, I have been trading options since 1976 and I would have to agree with your comments about CC writing. Good Post. Ken

To: Teresa Lo who wrote (10734)	5/11/1999 8:33:00 PM
From: David Wright	Read Replies (2) \| Respond to of 14162

"I have always thought that options should be traded by people who have done lots of research on volatility, and having worked in the brokerage business for 14 years" Well, now we have reached some common ground. I agree with you that options are much too complex a game to be traded by the neophytes, including myself. However, I would submit that almost any trading strategy, stocks, or whatever, is very complex and difficult in today's fast paced market. Covered Call writing seems very simple. And for the devotees of clowns like Wade Cook, it is simple until they find themselves sitting on a stock that they paid $20 for, which is now worth $3, and no longer lists options. Covered call writing, as practiced by most, including those who use McMillan as a bible, is simply a way to enhance long term holdings. It is not unusual to wind up with a very small net as you "protect" your long term position...taxes and dividends weigh heavily into the traditional Covered Call writing strategy, and premium is sacrificed to keep them in place. No doubt, as you said, something the brokers love. However, if you are willing to view Covered Call writing from a business perspective, then you would find that total ROI is only a small piece of the covered call puzzle. Instead, cash flow management, leverage through financing (margin), compounding your profits quickly to achieve maximum growth in equity, insurance to protect your downside, and careful trading to obtain position, will give you returns that will rival any strategy out there. I don't have years of experience trading like you do, but I've run lots of businesses, and I would have killed for the cash flow and relatively risk-free returns I see from Covered Call writing from a margin account. I don't think you can consistently beat it anywhere else in the market. But like everything else, you have to work damn hard at it. This is a full time game if you want maximum returns. A truly great Covered Call program is FIRST an MBA's game, THEN a stock or options trader's game.

To: Teresa Lo who wrote (10734)	5/11/1999 9:04:00 PM
From: Herm	Read Replies (1) \| Respond to of 14162

The dialog has been pretty good the past two weeks. Lots of new ideas, plenty of helping, and sharing. I'm trying to digest your subjective point of view. I do notice that you have been hyperlinking to the same web site which is your home turf. By the way, what is your real name? I do have to comment on your points. It peeks my attention when "experience people" in the brokerage business come online with overtones of "you guys are doing it all wrong" and not illustrate in writing and by example more than their words! That is not fair and an unproductive use of this opportunity. Your Point #1. As you know, there many ways to trade options and stocks to make money. The "pros" each have their own tool shed of things that work for them at certain times. And, we would love to hear from them and pick their brains. Staying on the forum's theme of covered call writing, according to McMillan,"option traders have two MAIN ways of trading. The first is to predict the price of the underlying stock - directional trading. The second is to take a initially neutral position based on option implied volatility - volatility trading. The profit is made when extreme moves are made. We (the regular lurkers) clearly have been successfully applying CCing to make money in the stock market. We are applying the first approach which is to predict the stock price using the BB, RSI, etc. along with the fundamentals. We have not had an expert discuss the other method. Now, when I have people who have indicated thru private email that they are trading upwards of $275,000 accounts and CCing was part of their "tool shed" and to keep up the good dialog and forum, I have to wonder where you are coming from. It may not be your style, but, there is a valid place for this type of trading for many novices and "pros." Your Point #2. Because writing CC violates the central principle behind long term success in the market Man, that is REALLY a bias opinion. Every one of your points of the old CC dogma have been addressed in the WINs approach which is basically a summary of 9,000 post on the topic. Now, individuals on the forum do tweak here and there! But, my friend, I don't hear too many readers say that they are not making money on this forum. In fact, they indicate they are making more now than previous experience with ex "brokerage professionals" advice. Now, I notice you do S&P trading. So, you must know the pro named George Angell. In his book entitled, "Sure Thing Options Trading," in chapter #4, page 83 he writes,"Over time, the writing side of the option equation is apt to produce the most consistent and reliable profits." Stock options is akin to betting against the house in Las Vegas, the selling, or writing, of listed stock options is akin to being the house in Las Vegas, booking the bets of eager gamblers all looking to make a score. When was the last time you heard of a casino going out of business if they know what they are doing? In closing, . In a way, they are assuming the burden of holding all the paper and exposing themselves to capital losses while holding out for small gains in income. Like I said, we have a proper response for that possibility. I don't lose sleep when I know I have my CCer's premies in my account. As for long term capital gains? Heck, having a short term tax gain problem is a very nice problem to have in this country. It's like instant gratification! :-)