why do people recommend covered calls.

But the end result is the same, ie stock called away (you wanted to sell at X price) or it does not.

With the obvious caveat that if moves up faster than expected you will have to wait till expiration.

But if you had a limit order on a naked equity position, you would have sold off your position anyways. CC lets you collect a cash for waiting till expiration to sell at X price at Y time.

VS sitting on your hands with an open limit order.

 

It was a matter of time before you or Martinghoul chimed in. Obviously, you have a clean compliance/disciplinary record.......I hope! :eek:

 

The put-seller may have a slightly better chance of recovering money via litigation.

 

I like Marti's sense of humor and I respect his knowledge of options too. In fact we've been on opposite sides of several options related debates over the last bunch of months and none degenerated into childish arguments.
Now that you’ve ducted the question for the first time, let’s try again.

What would litigation have to do with any of this?


Mind you that compliance and or disciplinary records have nothing to do with any of this. For the record, although my firm has been selected for a random SEC audit several times in the last 12 years, nary a cent was ever in question nor file out of order. In the same vein, in the 16 years I spent on various exchanges as a MM I never received a violation for more than anything but a cursory dress code, or language slap on the wrist.

 

How could that be? What legal precedent supports that?

 

1) Me too.
2) With a retail-oriented brokerage/investment firm, not a professional trading firm, naked put-writing is more likely to be seen as unsuitable and get the firm into trouble if the client can portay himself as a "victim" compared to covered-call writing. I will leave it at that.
3) Did you dress too "casual" on a Casual Friday?.....flip-flops and a dago-t?

 

Again, yes and no. Your assumption is based on the premise that the stock moves up and is exercised.

If it moves up prior to expiration, the short call will be a drag on the return. If the UL reverses, you might not be assigned and might never see the return that the unencumbered long stock owner realized on the rise.

It's not right or wrong. It's just different results, eg. cash in hand now (CC) versus more cash if the move occurs sooner (no CC).

 

Put writers can't vote.

 

how do you get screwed if your calls are covered?

 

1) The upside is "covered", not the downside.
2) You lose a lot more on the stock compared to the value of the call-premium.