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Answers to questions below:
1) Don't really do smoothing with applications--just with my eye.
2) Yes, I call this a range rider. I like to buy options on a range rider like this
when it hits a short term bottom "channel" (though this stock doesn't exactly
channel).
3) I don't write many covered calls. I think it's a great and conservative play,
but I don't like to wait that long. I do a few covered calls with my conservative
account. I nearly always trade straight options and I do so on strike prices two to
four months out.
4) I'd buy a straight option two months out. To make the play toady, I might get the
in the money June 50 calls (there are no April or May options on RCL). This is a
nice play because you've got plenty of time for the stock to move up. And once
you're in the money (as RCL is trading at 52), and with the exercise date being so
far out, the option appreciates nearly as quickly as the stock: RCL moved up 3/4
today and the June 50 call moved up 5/8. That's great leverage.
Leo Karl wrote:
> Michael,
>
> I've been studying covered call writing, and I haven't as yet developed
> a comfortable understanding of what all is involved. I wonder if you
> could comment on a few questions.
>
> 1. Can I assume that you like the smooth price rise over time?
>
> 2. Were you influenced by the near term drop off, relative to the
> otherwise smooth rise?
>
> 3. Since the out of the money premiums at 55 are only around $.25, what
> kind of strategy would you employ to be most profitable.
>
> 4. I guess what I'm asking is assuming a continuation of the trend, how
> would you see playing this option, and why.
>
> Thanks for sharing.
>
> Leo Karl
>
> Michael Smith wrote:
> >
> > Does RCL look like a great covered call candidate or what. Any guesses on it's
> > ability to keep climbing.
> >
> > See attached chart.
> >
> > ---------------------------------------------------------------
> > [Image]
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