Hmm, you lost me right here. I think the whole idea behind investing is to increase the value of what you have. To add in the element of a timeframe is a modification, but the underlying goal should still be the same. Based upon that, options, calls, puts, whatever, should be established to attain the appreciation of your capital. IMHO!
Load up on as many short SP put options as your broker will allow. Go long one plane ticket to Brazil. If the put options expire worthless, sell the ticket. If the market collapses, head for the airport.
Like I said before if you are happy with the results and making money that's good. As long as you know you are kind of defeating the purpose of what your doing. Like I said in my two examples. How can anyone be happy to own a $50 stock only to watch it go to $100 and you make a lousy 2 or 3 pts but if it goes to $25 on a gap you get to eat the whole loss minus 3 pts. As an option trader you have to look at what your receiving for the risk that your willing to accept. You are taking all the risk but saying just give me 5% of the reward. It just doesn't add up. Again I'm not trying to be critical of you but a better way to play covered calls would be to put on collars for credits. With a collar you can still make a small yield on the upside and have your downside completely protected. Just a suggestion.
This is not a very good idea. There are a lot better ways to capture premium then this. Just make sure you have that airline ticket. LOL.
You and Canyonman are proving my point about personalities. Both of you may make respective fortunes and both of you may be right about your strategies. Personally, I might be happy with 2 or 3 lousy points and don't care about it going to $100. I don't look so much at what I could have had, because $53 could be the top and then we could go to $20. For you, missing that trip to $100 could drive you nuts. My problem is that I cannot hold to $100 anyway. I'm gonna book profits long before, options or not. Having realized this some years back, I have modified my trading style accordingly. It's like telling an obsessive/compulsive person to just cut it out and relax.
KTM, I agree with you 100% about the personality thing but one thing I'll add about you not caring if the stock goes to 100. If your last play gapped down to 20 on you and you lost 30 pts then you might be worried about only making a lousy 2 or 3 pts on your next play. LOL. Let me give you an analogy. I've met a thousand of these guys that go to vegas and sit down at a blackjack table with a simple well thought out card counting strategy of some sort. They say they simply want to make a few hundred bucks playing maybe 100 hands or so. They are going to play really tight and conservative. Then they get hit and they are down $500 after 30 minutes and start swinging for the fences because they are in the hole and don't want to make back $20 an hour from a $500 deficit. In other words as long as your up, making 2 or 3 pts a month sounds like a really good time. But if you get hit with a big loss, making that 2 or 3 pts a month is going to be chinese water torture. Just something to think about.
Agreed. It's all about the losses. Keep the losses small and the winners will take care of themselves. I hope no one assumes that a successful covered call writer shorts calls and then sits back and hopes until expiration. This is another reason the fundamentals are important. If we drop like a stone, I should be happy because I have done my homework and I know the market is mispricing some event. If you do your homework on the underlying, you should not be surprised by stock movement. The drop should be an opportunity. Too many here just want the holy grail...the effortless route to near riskless millions. It seems the relentless pursuit of such prevents some from developing the skills required to actually become profitable.