Of course it *can* be done. You can always walk up to a craps table and instantly roll double six. But you'd be a fool to bet on it. Or anything else at a craps table for that matter. You still have not told me WHO you think is paying you this apparent free money you have discovered. I'll answer it for you: Goldman Sachs and the other large banks who make markets in options. Now tell me why they are paying you for your option. Please. If you can answer that question then you don't even have to do the math to see why this isn't an income in the long run.
Not "free money"... Who: market makers, banks, stock brokers, hedge funds, pension funds, foreign governments, wealthy people in other countries, individuals. Why; they believe they know where the stock will be in the future. They can buy (low) and sell (high) their stock to other gullible people. This can happen especially during earning and dividend announcements. They also greatly control the market in which they are in. Do I win this game??
The most you can earn on XOM out the Jan is 7%. That's six weeks of stat vol. You feel you're winning bc cognitive dissonance.
Hm...interesting. I mean, everyone knows already that CCs are shit as a trading and investing strategy, no doubt...BUT: A friend of mine recently got into stocks and he was seeking advice. I told him to dollar cost average into the SPY and some high dividend yield single names each month and forget about the trading part. "But then I don't even trade" Then I said he should be selling 15-10 delta calls 30 days out on his index position to "enhance the returns". They don't do anything in terms of P/L, they will never get exercised, the risk is the same as dollar cost averaging and the CCs keep him busy. Even though covered calls have negative expected value unless the bet on vol is structured correctly, they CAN give you a couple of bucks extra and make you feel like you're doing something when you are actually not. Unless you start to do funky stuff like overwites and synthetic short straddles, your risk isn't really higher than with a traditional stock portfolio.
he’s selling a call presumably because he has some view on the distribution of Exxon (that it won’t sell off much). He didn’t trade it because Goldman was looking to offload inventory to a sucker.
This is why people do it and the reason people are able to sell books about how to do it. If you weren't too good at math or engineering then you simply don't know you are being fooled. The height of arrogance is thinking the math doesn't matter so long as you believe it doesn't matter. There's a time to use your spidey sense and there's a time to ignore those inner feelings. Knowing the difference keeps you out of a lot of trouble.