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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 (10745)	5/11/1999 10:25:00 PM
From: Teresa Lo	Read Replies (3) \| Respond to of 14162

Well, it looks like you have all the bases covered, and a well thought out plan is the way to go. My handle is "Forrest Gump" on my site, which I created totally out of boredom since my retirement from the office to trade at home, and because I had been cornered one too many times at cocktail parties by people who lost money in the market and implied that pro traders were the ones who took it from them. Now when people ask me about the market, I just say, "I don't know" and spit out the URL. You are right about what Larry McMillan said. I have attended his weekend seminar. To expand, what he meant in his comment about volatility is that if you're buying options you want to buy in times of low volatility and if you are selling, you need sell in times of high volatility, as premiums expand. So all methods should be directed to sell options in periods of high volatility. Also, I did say that institutions write CC because they cannot possibly move entire positions of underlying stock, so they might as well derive income from a significant portion of their core positions. This does not mean that they are not hedged to the downside via some other method. So, yes, there are legitimate reasons to write CCs in the appropriate context. Writing CC certainly has a place in large portfolios, but it may not always be the correct strategy for most retail clients with only 1,000 share positions since they are able to maneuver well in the market with small underlying positions. Your comments that people on this thread have been making money is of course true. The market has been going straight up for years and years rewarding buy and holders and therefore, they should be making money hand over fist, despite writing CC and occasionally getting called away. In fact a good bull market forgives every single error that befalls traders on the long side. George Angell is right as well, but I don't know if he was talking about writing CC vs. writing naked. When I worked in the firm, I was part of a trading team that wrote naked calls and puts for years and we made gobs of money. One important thing to watch and analyse is VIX, the market volatility index. In fact, we were the only ones allowed to do naked anything in the wake of the 1987 Crash. When I talk about brokers, I am sorry I am down on them. Inside any firm, there are only traders and salesmen, despite titles like "investment advisors", and being a trader, I treated salesmen with distain and always frowned upon their commission generating advice to clients, and therefore, developed a bad attitude toward writing CC as just another sales tool to generate commission. The latest thing is convertible bonds and the like. I find it annoying how they find so many ways to generate commissions when one equivalent trade will do the trick. I guess the clients like complicated strategies since it appears to be more sophisticated. I mean, how can you say no to some strategy that includes the word "bonds"? So perhaps my only contribution to this thread will be more info on VIX if anyone cares. David Caplan has a good book on options at amazon.com