Well honestly, I think Covered Calls are AS risky as they appear. One is well aware of the risk profile and maximum loss of a CC posiiton so they risk is quite evident and obvious. Anyone not fully aware of it is not truly familiar with the strategy. You can manage the risk better by stock selection for CCs but whether you choose a sleepy sideways stock or high flying IV stock, the risk is very apparent- as it is with any strategy.
No problem. --It is human nature by the way to be sarcastic and scoff at the ones who are truly trying to help others. This is exactly why my strategy will continue to be a major secret to the majority of traders and will allow my strategy to continue working for years to come.
Buy1Sell2, I was just joking, please don't be offended. Seriously, do you think being a net seller of options is the way to go? Based on what you said, if there is a stock called B1S2, I will have an inherit edge just by selling its options? Thanks!
absolutely --especially out of the money and if you want to throw prediction in there, then sell near the tops and bottoms--although I prefer the tops.--But overextension is what you want to avoid. Overextension is the main killer of a trading career--hand in hand with capitalization. They are really nearly one and the same.
Overextension? Could you explain? I'm new to the options world, and intuitively it seemed obvious that selling over the long-run was the way to go. (Probably not as effective if your object is to turn 1k into 100k in a few months) Selling worries me because of the possibility of having to deliver.. But, selling OTM contracts outside the trading range, is something I'd like to develop an expertise in. Could you suggest any links/resources?
overextension means keeping your leverage extremely low, so you are never forced to liquidate to get rid of margin calls. You will be forced to buy back your options at a time when the premium is out of whack and at just the time when I would like to sell it to you.
hmmm, interesting. Again, showing how green I am ... So at expiration, if you've written contracts you can deliver the contracts instead of the stock? Up til now, I've primarly been interested in data crunching, have to develop a workable stratedgy now. I've accumulated mounds of data, and an infinite way to look at it.
You can always buy back till right before expiration. After the contracts expired, you have to deliver the underlying if the other party exercise their rights.
I'm confused by "buying it back", obviously you're not buying back the same actual contracts you've sold. So, if you holding the the same amount of contracts you've written, you aren't required to deliver? Or if called, do you deliver the contracts in leiu of the stock? sorry about the dumb questions ..., just beginning ...