Continuous rolling of covered calls

Discussion in 'Options' started by ferrycorsten, Jan 8, 2013.

  1. sle

    sle

    Yup, you appear to be right, for whatever reason yahoo mobile gives me adjusted price of around 19-20 all across time. Bloomberg mobile gives me 25.19 as the starting price. Go figure.
     
    #11     Jan 8, 2013
  2. hedgeman

    hedgeman

    This is not a strategy thats going to work for you in the long term. You will always have risk with the stock. Look at this trader's site, if anything, watch his free videos on youtube and learn why covered calls are not for you. http://www.radioactivetrading.com/
     
    #12     Jan 8, 2013
  3. If you can find a stock that is range bound I think it is a strategy you can use EXCEPT for your idea to sell ITM covered calls. If you sell ITM covered calls then buy them back, I don't think you are going to make much money doing that.

    When I sell an option I want it to expire worthless. Selling an ITM option decreases the likelihood of that happening. When I sell a covered call I select a slightly OTM strike (delta of 30-40).

    KO is a stock I have had some success recently with. It is range bound between 36-38. If you can buy it close to 36, then sell say a 37.5 covered call I think you will be more successful than you would be by buying close to 36 then selling a 35 covered call. Either it will cost you too much to buy the call back or the stock will be called, assuming the price of the stock goes up, of course.

    Another possibility as it applies to KO. If you wouldn't mind owning the stock at $36, sell a naked put at that strike. This strategy has the same risk as the covered call.

    Just my opinion and I am not very smart.
     
    #13     Jan 9, 2013
  4. xyannix

    xyannix

    You need a stock with high implied volatility. Also, ITM options have very small premiums, and you need to take into account bid/ask spread.

    When they analyzed the Bernie Madoff strategy, which was but a put, sell a call and repeat, they said it still required market timing to pull of an annualized 8% return.

    Here is a nice piece about your strategy http://www.optionsweekly.com/covered-call-returns-5-percent-a-month/
     
    #14     Jan 10, 2013