Replies to post #52 on Maksims Covered Call Options Forum

[inflationista]

if it falls sharply you don't have to worry about the shares getting called -

if you think it's gonna rebound, then you can buy the calls that you wrote back while they're cheap and get ready to hit it again on the next pop -

[maksim]

One of the good things about covered calls, is that at any time, you can do a few things.

If you do passive covered call writing, all you care about is expiration.

If you want to do it more actively, you can at any point...

1. Roll up (Buy call back, and write one of higher strike)
2. Roll down (buy call back, and write one of lower strike)
3. Roll out (buy call back of near month, and write another a month out).

You can also roll up and out, down and out, etc. What you are trying to do is capitalize on the time decay of the call.

80% of all calls that are bought expire worthless. What you are doing, is making that money. If you think the stock will move up, and would want to capitalize on that, than you would write a call option out of the money, so if UYG is now $5.55, you can write the $7's. Less downside protection and less premium, but if called, you get the time premium, PLUS the gain from $5.55 to $7.

You can actually write a covered call, go away, come back at expiration, write other... and you would be ok!