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Maybe a better example would be one like NSCP. It's easy in hindsite to only
choose stocks that go up. What would the strategy be for one that goes down?
What do you do when the stock drops quickly but much of the time premium
remains? Take a double hit and buy the options back and sell the stock?
In a message dated 2/6/99 4:44:39 PM Pacific Standard Time, gary@xxxxxxxxxxxx
writes:
> If you have the data, it'd be interesting to try simulating a covered
> call strategy, on say, HWP (Hewlett Packard) going back to 1994/so. HP
> had a strong run up, and recently sold off dramatically, but snapped
> back over the past couple of months. Maybe AOL or CSCO would be better
> to prove your point about the effect of limiting upside. I think Yates
> sold options once a quarter, at the money. Simulating the sale evey
> month might be better for a sample of one stock because it will even
> out some of the lumpiness in the equity stream.
>
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