TRYKtrading
Registered: Mar 2008
Posts: 302 |
11-03-09 05:48 PM
so i want to open the discussion about a long term fixed income options strategy a very wealthy friend of mine who lives in silicon valley that uses stocks like citibank as a monthly income.
basically, from how he explains it, he owns x amount of citibank, and write out of the money calls every month for the expiring premium on the assumption the stock will continue to creep up every month, thereby realising the long term capital gain, and at the same time securing a fixed payment every third week of the month to the tune of $25K.
he does very well at this, it seems, although i have personally never tested his trading strategy for being a swing trader myself.
and feel free, atticus, to cut into this with your insults. i'm sure this thread will go off the rails at some point with stupid insults rather than sticking to the subject at hand.
so at $4, am i writing the nov4C, the nov4P, or the 5s?
am i vertically spreading, or just selling the one or the other?
am i having to repurchase the shares every month at expiration for writing, or simply keeping the premium as my paycheck and any gain in the stock is inherent to the long term position in my margin?
consequently, my long term outlook for citibank is nothing but up, i see little or no downside for years into the future, and i see this a $20 stock by next year.
so every month, i'm selling options for income, reinvesting the profit against margin to increase my holdings on a dollar cost averaging basis, while limiting my downside almost absolutely.
let the games begin...
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