Anyone know a good covered call service

Nikko, in all due respect, I wasn't painting any kind of story. I was merely laying my trade out with actual numbers and dates and attempting to lay out where the trade will be whatever happens.

The main foundation of my posting is the net debit of $6.91. Everything else is beyond my control.

I still don't see the fire. I only see that on a worse case basis, my $6.91 is at risk. If I were not capable of assessing and handling this risk, I wouldn't be trading securities. I'd be buying Treasuries, CD's, or another similar alternative.

By the way, the IV on the calls will drop significantly no matter what the decision is. That always happens. Besides, what's this stuff about "digging out for years"?


Bob

 

And I told you that a 50% drop in IV is a very conservative number. If it drops to its historic average, it will be more like 80% down and that won't bode well for future months.

Like we didn't already know this?

If there's an unfavorable ruling and AGIX drops below $5, do you think there's a possibility that its option trading will cease ? (future months will not be added). If this occurs, you'll get bupkus in premiums for subsequent months and your flexibility won't exist.

That you can stand losing $6.91 is no more than a rationalization.
It does not change the riskiness of the position.

Good luck with AGIX.

 

Nikko, if there is an unfavorable FDA decision and IV drops like a rock (the one thing you and I both agree on), if I am so inclined, I will surely be able to buy back those 2 $12.50 April Calls for 5 cents, or about $15 including commissions.

Anyway, I will share here what I am doing as things develop and you can continue to take shots. In all sincerity, I like what I did a lot more than the action of the person who purchased those two calls for an IV in excess of 300.

Finally, if you feel that assessing one's maximum risk is mere rationalization, so be it. You may well be right that I will loose on this trade, but I seriously doubt it will be anything close to the present $6.91 I presently have on the line. For sure, the events of the next 4 weeks or so, will tell us both.

The one thing that I am second guessing myself on is why I didn't write the March calls instead of going out to April. I was swayed by the fact that the April IV was much higher than the March. Even so, because the FDA announcement is not anticipated until after the March expiration, I might in all candor have screwed up on this aspect of the trade. What can I say...I weighed the pros and cons and decided on the April.

Bob

 

Actually, I think Nikko and Bob could both be correct on this one. This depends on Bob's money management. Yes, Nikko is right , there is a lot of risk in the position. That is why the IV is so high. But I can believe that Bob can make a good return by doing this over and over again with a small position size on several different stocks. If the odds are in Bob's favor, then over time he could make a lot by not betting much (relative to his total capital ) and doing it hundreds or thousands of times.

 

Donahuedc, thank you for your posting.

You're absolutely correct, Nikko is right in saying this is a trade with higher risk one normally encounters in a covered call write. Matter of fact, I can't remember seeing such a high IV, and as I said in an earlier posting, I've looked at a lot of FDA anticipated action propositions over the last few years. The is AGIX thing is in a class by itself as far as potential boom or bust is concerned. One thing is for certain....it bears watching and we are all going to learn something before this one is over.

As far as my being able to do a lot of these types of trades, I wish that were true. Unfortunately, for the past several days I have not been able to find any additional low priced stock/high IV situations that are to my liking. Especially using March Calls. With commission costs, I can't do much with anything less than a dollar, and preferably considerably more. So, Nikko is right on the money when he says that it is quite possible that an unfavorable ruling coupled with a gigantic drop in IV, will for sure make continued rolling of Calls no longer a viable alternative. If that happens, I'll no doubt have to sell my stock and lick my wounds.

I do want to express my appreciation to you, Nikko, Michael, and everyone else for their postings. As far as IV Trader and his comment regarding "playing with fire" is concerned, no problem there. He and I go back a few years in another forum. He's really a good guy and for sure knows his options.

Bob

 

This thread could just as easily be called "Does anyone know of a good short put service?"

 

ask this guy-

 

You call it "$6.91", but I call it <b>75% of your entire investment</b> which is at risk here.

Doesn't sound quite as safe when put in those terms, does it?

 

Just in looking at the quotes tonight I would think a better "bet" would be to sell the April 10/2.5 put spread. Net risk is 2.5 (with the $5 premium in pocket). All good option brokers allow naked put sells (cash secured) in IRA's. Heck of a lot better than the CC IMO.

 

Richard, I'm not sure why you are quoting me. I said a long time ago that a covered call write was the synthetic equivalent of an uncovered put write. I wasn't comparing the two alternatives.

Since I first joined the ET forums back in January people here have been jumping all over me at the slightest suggestion that synthetics were anything but equivalent. I have now come to accept that they are equivalent. Yet you try to say that one is a "heck of a lot better."

They don't seem to jump on you. Maybe I'm not a member of the club yet.



Bob