Again, you and I dont know who is on what side and how those trades are being executed so I would say this. Yea people and institutions trade to make money but just because you see volume does not mean shares are being pushed back and forth to make that 2 to 5 cents round turn.
First off, there's always downside risk on the stock. You may be bullish and be willing to accept it but it's always there. The returns will not be consistent. There will be no fixed payment every third week of the month, say to the tune of $25K. If you wrote the 1 month $4 CC for 25 cts and C was at $4.50 at expiration, what would you do then? Roll out a month for only another dime? Roll up to the $5's for a 40 ct debit? What if C was $3 at expiration. Would you sell the $3's for some premium but potentially locking in a loss if assigned? Or would you write the $4's for a coupla pennies? And FWIW, IMHO, rolling up for debits is a beddy beddy bad thing to do
i agree but i was using C as a longer term example, because i would likely look to higher strikes and much longer out expiry to take advantage of the time decay and minimise downside risk as the stock fluctuates. i'm thinking six months, a year, and writing the highest calls on the probability they will decrease in value at a higher rate than a closer ITM call. but yes, absolutely i am looking at other stocks. i believe WMT is a great stock for this as it moves so slowly sideways and rarely moves in $5 points to cover option expiry on the OTMS every month. thanks for the input.
There further from the ATM you go the slower the decay rate. There is always downside risk in every stock, period end of story. Selling calls is not really a good hedge to downside risk. Ask any of the covered call sellers how they did in 2008/9