Chris, yeah 5k open interest is not too bad if it is not one or two blocks. And if the same 100 or so contracts is trading each day next week. It may be interesting to sell both the june 5 call and put and hedge with the 7.5 call and 2.5 put. I think this is called a butterfly or a pegasus or something like that. Looks like that would create a credit of about $100 for each done. But as for the notion per the site of using this stock for a covered call, the chart is not great, and the stock is up big since the march lows. So I suspect if momentum fades by next month you may be holding a $3 stock with a 10 cent call for the forward month.
You will find that smaller stocks have the most edge. I only wish I had the capital, like Nitro, to constantly scan 100,000 symbols and then hold the resulting positions.
Everyone wishes they had Nitro's cash, in fact at one time it probably was their cash and Nitro took it from them in the markets. LOL Trajan, Have you ever done any sort of testing of this? For instance, there are about 25 give or take small companies (low share price) that are optionable that I track. NT, LU, JDSU, etc that were once Darlings. The option premiums are around 6-10%, is it worth buying and selling covered calls, vs say waiting for a good buy signal and buying and flipping the underlying?
You mean, you can find edge on stocks trading for a couple of bucks? Either way you are long and, at that point, I would consider any short itm put to be long stock. The difference being better entry price and a cap on profit. The way to decide is to think about how likely it is for the stock to move through the strike.
I have traded a couple of small stocks as a MM but don't now. The edge is much bigger which is compensation for the fact it may be the last time you trade an option in that stock until expiration.