The market is up at the moment (noon on Aug 2). For those of you interested in trying an option trade in the virtual simulator for yourselves, this might be a good time to try selling a Covered Call on SPY (The S&P 500 Index)

Here's an idea of what you might do:

1. Go to the options Simulator. You can find a link on the Resources page at www.bivio.com/COOL_Club

2. When you get into your virtual account, use the "Add Virtual Funds" link toward the top right of the page to add $30,000 in virtual dollars to your account.

3. Go to the Trade Tab and buy 200 shares of SPY at the market. (You need to own shares to do a covered call)

4. Now its time to look for an option to sell. Go to Account Overview and select the "Chain" link you'll see next to where your SPY's are listed.

5. Scroll down to where the Aug12 calls are listed. You are going to look at the bid prices in the second column. As I'm looking at this right now, I can sell a $139 Aug 12 call for $1.73. I'm going to place that trade for 2 contracts. See what the bid is now for you to do the same thing. Go ahead and place a similar trade, (assuming SPY is still in the 138-139 range) or, pick something that you think looks more attractive and place a trade. Remember you are going to "Sell to Open".

6. Follow your account status to see how the option changes in value as the value of SPY goes up and down.

7. I have received $346 virtual dollars minus commissions for selling these two calls. If SPY's go down in value over the next week, I should be able to use some of this money to buy them back at a lower price. Then I'll get to keep the difference.

8. I'll add my trade to the COOL Club homepage so you can watch how it does. But I encourage you to try a virtual one of your own. You won't really "get it" until you try doing it for yourself. It's virtual money so the worst that can happen is you will have a learning experience. Feel free to ask questions here if you have them as you try doing this on your own.

9. Have fun! It really is a lot of fun to watch how your virtual trades do.


Laurie Frederiksen
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