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Fred,
Your initial purchase/option position paid you 3.1% gain in 1 month if called. Granted a 27% annual rate is impressive, but is the 3.1% gain enough for your purchase decisions? It isn't for me. I requre at least 10% total return (upside, dividend,premium) with a minimum 2%/month return. I want to get paid for making good decision.

If you want to own stock, do you really want to sell it for a 3% gain?

I'm long CHK since Jan 16, but have waited for price appreciation to write a covered call on my position. I'm going to wait a little longer before selling covered calls as CHK is still below the MFIV buy below price. When I do write the option it will be for $40's or $45 (at least 10% upside from the current price).

As for you current situation: One of my options rules is to never give the money back. If I repurchased a $1.00 option for $3.20 then I'd sell another option for at least $2.20. A Jan 08 35 for $2.80 would meet my requirement. Your new ARIC would be 22.8% (2.1%/month) for the entire investment. $5.35 upside, $1.20 net option premium and $.24 dividend.

John






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