Maksims Covered Call Options Forum

[maksim]

Was going to say, Since GNW such a cheap stock its all good, depend on cost basis.

I started doing calendar spreads on options after my WAMU experience. Since in my Roth and Traditional I could only do covered writes, I bought wamu shares, and kept writing calls against them. Then wamu went bust. =P

The good, options saved me 30% of hte loseses. So made a 10k loss down to 5 or 6k or so. Bad news, it was a loss. So my takeway from WAMU was the following.

Avoid buying gamble stocks outright, and do it on a basket instead. That, or if you look at the post I had before, trading rules, or maybe I didnt post it yet, dont have any one holding be more than 25% of your holdings under 10k trading account, or 10% of a more than 10k trading account.

So what I did with Ford, is instead of paying $2 a share then, just bought $2.50 calls, for Jan 2010 for a $1. I wrote dec 08 calls for $.40 cents, so 40% of my basis is paid for, in 8 days, Will write the next set, and voila, in 2 months, my 1 year long leap is paid for. I can either close out position, or keep writing.

With UYG, did the same thing.

While options are a gamble... you know exactly how much you stand to lose, less you are writing naked calls.

So if you have $2k of stock you would buy typically, you should not be buying $2k worth of options that control $20k worth of stock. As long as you are disciplined, you can do very well.

One of Dennis Gartman's rules which I love, and did not know others followed till I started following him. Typically you have people who trade, er invest fundamentals, and others trade technicals. Gartman's whole trading mantra is make desicions based on fundamentals, when they are supported by technicals.

Hope that helps.