Quote from ausgate:
try these senarios
$24k margined to $48k - buy 10000 stock @ 4.80
buy 100 of jan10 $5 puts @ $2.00 = $20k
sell 100 jun5 calls @ .42 = $4200
1.
price takes off, say $7 which equates to .2 cg = $2000 + $4200
2nd month
$47600 - buy 6800 stock @ 7.00
sell 68 jul7 @ .7 = $4760
3rd month price drops back, $6
$48000 - buy 8000 stock @ $6.00
sell 80 aug6 @ .48 = $3840
etc etc, after 4-5 months put payed for. 13 months selling calls
2.price drops, say $3.50 = no cg $4200 premium
2nd month
(17500 + 4200 x 2 = 43400) buy a further 2400 stock @ 3.50
sell 124 jul4 @ .25 = $3100
3rd month price up to $4.20, .5 cg + 3100 = $9300
keep 7k towards the sold put and buy 11400 @ 4.20
sell 114 aug4
etc etc. if the price falls re-invest the premiums until the 24k is replaced, never invest more than the 24k until the put is payed for. The put is to protect the 24k, pending any disaster surely the most you can lose is the put price less any premiums sold. The target is a year or more of sold calls.
