trhe difference in deltas is really not significant if you are taking a long-term position. talking about less than a nickle per dollar move in the stock. better off setting up the position now for 6 - 9 months out and just let it run as expected. No need to get .99 delta 9 months out. .94 delta still lets you get into the stock for about 1.3 the cost/risk and a good profit if the stock moves higher.
Optioncoach has it right, but he did not mention that you SHOULD be rolling covered calls on a monthly basis at one standard deviation out on the strikes for 30 cents or so. It creates what I call a long-dated diagonal position. After six months, you have lowered your cost basis and halved the theta risk. Another idea, if you were to do a long-dated diagonal on something like IWM, you can write calls for a long time, and if you are good you can get beta exposure for free.
Stupid math question... I know what standard deviation is but what's one standard deviation out on strike when it comes to options? Is it the same as one strike up from ATM? Thanks!
What's delta got to do with it ? The delta of an ATM option is always 0.50, regardless of how far away expiry is. It's Gamma (rate of delta change) that's all important. Gamma is also opposite (but not equal to) Theta, so you have to trade one for the other when choosing how far out in time you go......which will be a function of how you expect the underlying to move.
You would sell the strike that is 1SD out from the underlying. If the underlying is at 100 and 1 SD is 5 then you would sell the 105 strike for example.