This is the first time I've sold a covered call (the first time I've done anything having to do with options).   Starbucks is a long-term hold for me.  The current one year price target for Starbucks is $23.42 (according to yahoo finance) which is one of the reasons I chose a Jan 09 $25 strike.  The second reason is because of my cost basis.   I don't think Starbucks will reach $25 before Jan 09, but if in fact they do, and the options are exercised,  I still make a profit I can live with.  If not,  I can live with that too.  I still keep the premium and will most likely just write another covered call.   In the scheme of things, I feel comfortable with this decision.  It was nice to have The Options Playbook to refer to.

I am happy to see the online "Playbook" is being put to good use. For other members of the community if you are a TradeKing client and are logged into your account the online playbook is found under the tools menu. Also, wanted to mention that there is a web cast in the learning center about the basics of covered call writing, this is currently free to everyone in the community. Upod - the next concept I would recommend is about rolling the covered call. Please read the "how we roll" section of the playbook.

Regards,
Brian (Og)

Hi Brian - Question, On Monday, I sold 8 contracts on Starbucks that expire Jan09. Yesterday, after reading about cash secured puts in the options playbook, I decided it something I might want to do and decided to walk through the steps in the Options\Basic screen. For action, I clicked Sell to Open. Under Contracts, I entered 1. For symbol, I entered the symbol for Starbucks April $16 puts. I did this knowing I have enough cash on hand to buy 100 shares for $16 if the option is assigned. In entered in my limit price and made it a day order and then clicked enter. After I did this I received a message saying something to the effect that I couldn't do this because it would create a naked position and that I'm not approved for this level of trading.

Although I currently have 8 contracts on SBUX, I'm not sure why trying to do a cash-secured put would create a naked position since it's secured with cash. Unless I'm entering the wrong information on the on basic screen or am on the wrong screen altogether.

Again,  I wasn't going to actually execute this trade,  I basically just wanted to walk through the steps so I could become comfortable with it when I do decide to write cash-secured puts.

Thanks.

Cash-secured puts require L4 options trading. TK views them the same, in terms of risk, as naked puts. I also asked about this before. Here was that thread:

http://community.tradeking.com/forum/topics/229/forum_posts 

Upod, good to see you selling finding ways to hopefully make SBUX profitable.  I almost got burned badly by them myself.  I was buying them up at $23-$24 and thought that was a good price.  I managed to jump in and out a few times without taking any major losses, but as a long ter company, I think you're going to be alright.  Selling the covered call was a good move, I think.  I've been experimenting with selling covered calls with different companies and different time periods, trying to find out the best way to make a move with them.  Also, I think Costco is a wise move.  They're a good company with loads of room to grow.  I like in Louisiana, and I've never even seen a Costco in our state (although they might have one in New Orleans or Baton Rouge).  Anyway, with three Sam's Club's locally, Costco still has loads of room to grow, which is a good sign, I think.