I have few BAC shares at 27. I was wondering about writing covered calls for say 21 based on current stock price of 20.x. If the stock does move above, then I can roll it out for a higher strike price. I did the same last week, and then all stocks went almost 20% up, bad timing, I got chickened and bought it back for a huge loss as once the strike price is even a little deep in the money you have to roll out few months out, by then if the stock moves way up then my only choice would be to go for leaps. Now thinking back I feel, so what if i have to go out to leaps, as long as its above my target price on BAC ($33), i should not really care. But when real trading is happening different kind of emotions take over you. Has anybody used this kind of strategy and been successful, especially when the stock end up going up by 20% or so. Any thoughts
I think you know the answer to that; the strategy works, there's no doubt about it. The problem is that you let your emotions take over, which is something you can't afford to do while trading - no matter what strategy you use. Plan your trades, trade your plan, and manage your risk.
I used to sell covered calls but OptionsOptionsOptions and PoopyDeek convinced me to sell naked puts. There's no fixing a bad trade unless the market does it for you.
Selling naked puts on the Wheel is really less risky than buying stock for selling covered calls because hopefully by the time you get assigned some stock most of the downside is out of it. You get paid to NOT lose money. My criteria is on the ETFs Momentum thread.