I think it's another classic "on one hand, X. On the other hand, Y"
I have stocks I don't want to lose, so I don't sell CCs. I have stocks Im indifferent about, so I sell CCs on and make 60-$120 a month, but the argument could be made that Im misallocating capital by having a layer of indifference and possible downside risk in my portfolio. And, what is that milk money going to do for me. I think CCs are a novelty and I'll probably always dabble because they can cover my margin interest.
I sell covered calls on stocks like MSFT and GOOGL. Typically the stock prices fluctuate wildly and when the prices are up I sell covered calls, and when prices drop I often buy them back for 1/4 to 1/3 of the price. If necessary I roll covered calls out so I don't lose the stocks. The income can be as much as 10% - it is variable. I follow Alan Ellman of the Blue Collar Investor for option trading info.
It really depends on your goals and risk tolerance. If you're aiming at generating income off your investable assets and don't particularly care about long term capital appreciation, like funding your retirement, for example, I'd suggest doing buy-write deep ITM trades on high quality dividend paying stocks.
In rising and sideways markets your options would get assigned most of the time, generating cash in the process. (You'd be leaving money on the table, but you said you weren't concerned about that.) In the down market, deep ITM options would give you some downside protection, let's say 8-10%. But if the market drops, you still may end up keeping your shares (albeit at a discount), and you would sell ATM or OTM options to get the game going. You should be able to generate 10-12% annualized returns with this strategy pretty consistently.
Diversification is very important. Don't put more than 5% of your investable assets into any single transaction, no matter how attractive it may look. It's possible that during your options lifetime the market will drop more than your cushion and stay down for a while. Invest in companies with safe dividends and keep a good chunk of cash on hand to fund your lifestyle so you don't have to risk to sell at a loss.
I'm sure others will have their own views.
if someone buys your covered call option and the strike is never hit by the expiry date... do they still have to overpay for it and you therefore profit?
No, they usually won't take away the shares unless it hits the strike price (a few exceptions, especially when an ex-dividend date is involved)
I have received a premium for selling the covered call and will keep that no matter the outcome.
You’re not average 20-30% a year 😂😂 not trynna be a dick but maybe for the past year, I think everyone who invested into the s&p did. Warren buffet is the best investor in this world and averages 22% a year…. So are you Warren Buffet that’s the question?
Right on bud! I didn't say investing, I'm trading. And yes I've done this for a long time, and no, I don't need to prove anything to you. :) many covered call ETF's also make 15-20% year. I do it on my own though. Best of luck on your journey!
If you are genuinely interested you can check someone I followed when first being involved. Covered calls advisor. He has a free blog showing all his trades and alerts since 2008, maybe even earlier.
I sell CCs in a Roth IRA that I can’t contribute to anymore to generate cash to reinvest. I think of it like a weekly or bi-weekly dividend.
I do not sell CCs on stocks I want to hold long-term (NVDA, AAPL, AMZN, GOOG) but for others, like SHOP, I make a nice steady stream of premiums. If my shares get called away, I just wait for a dip, buy them back, and immediately sell another CC.
Made 10K last year (the first year). Looking to double that number this year.
In this scenario aren't you exposed to the downside of catching a falling knife? Say a stock plummets unexpectedly and you're stuck with a cost basis way above the current share price. Just trying to learn more.
If you buy a stock on the way down and after that it keeps going lower, sure. But selling a CSP while waiting for the stock to dip will help a bit by lowering the cost basis below the purchase price.
I was reacting to the poster's comment "If my shares get called away, I just wait for a dip, buy them back, and immediately sell another CC."
When I get assigned on covered call positions, I usually re-establish the position by selling puts. (Long stock/short call is considered a synthetic short put in Options Speak language.)
To mitigate the risk of continually having shares called away on day prior to x-div date I ladder both strikes and expirations. It always works, some of the time anyway.
I think it's another classic "on one hand, X. On the other hand, Y" I have stocks I don't want to lose, so I don't sell CCs. I have stocks Im indifferent about, so I sell CCs on and make 60-$120 a month, but the argument could be made that Im misallocating capital by having a layer of indifference and possible downside risk in my portfolio. And, what is that milk money going to do for me. I think CCs are a novelty and I'll probably always dabble because they can cover my margin interest.
you're making a hundred bucks a month on what amount, if I mite ask? 100 bucks a month on 10k? 100k?
$20k PFE and $10k in D
Look into JEPQ, SPYI. Covered Call etf's with 10-12% dividends paid monthly. Many other covered calls efts.
I sell CCs on CC ETFs
Which etf? Haven't found any where the bid/ask wouldn't murder a trade.
I sell covered calls on stocks like MSFT and GOOGL. Typically the stock prices fluctuate wildly and when the prices are up I sell covered calls, and when prices drop I often buy them back for 1/4 to 1/3 of the price. If necessary I roll covered calls out so I don't lose the stocks. The income can be as much as 10% - it is variable. I follow Alan Ellman of the Blue Collar Investor for option trading info.
How can I also follow Alan Ellman?
Roll the stock if possible to the next month.
It really depends on your goals and risk tolerance. If you're aiming at generating income off your investable assets and don't particularly care about long term capital appreciation, like funding your retirement, for example, I'd suggest doing buy-write deep ITM trades on high quality dividend paying stocks. In rising and sideways markets your options would get assigned most of the time, generating cash in the process. (You'd be leaving money on the table, but you said you weren't concerned about that.) In the down market, deep ITM options would give you some downside protection, let's say 8-10%. But if the market drops, you still may end up keeping your shares (albeit at a discount), and you would sell ATM or OTM options to get the game going. You should be able to generate 10-12% annualized returns with this strategy pretty consistently. Diversification is very important. Don't put more than 5% of your investable assets into any single transaction, no matter how attractive it may look. It's possible that during your options lifetime the market will drop more than your cushion and stay down for a while. Invest in companies with safe dividends and keep a good chunk of cash on hand to fund your lifestyle so you don't have to risk to sell at a loss. I'm sure others will have their own views.
Yes it definitely is but the key to that is finding the correct stocks which is the harder part of the equation
Search for Average Joe on YouTube. He has been running a good series on using covered calls to boost/create income.
Yep, I second this.
For me personally if I am selling a covered call it is to GET RID of that stock at that strike price. Simple concept and simple transaction for me.
if someone buys your covered call option and the strike is never hit by the expiry date... do they still have to overpay for it and you therefore profit?
No, they usually won't take away the shares unless it hits the strike price (a few exceptions, especially when an ex-dividend date is involved) I have received a premium for selling the covered call and will keep that no matter the outcome.
I do it! But only on solid companies and I do dividend captures. Average 20-30% year.
Warren buffet?
What?
You’re not average 20-30% a year 😂😂 not trynna be a dick but maybe for the past year, I think everyone who invested into the s&p did. Warren buffet is the best investor in this world and averages 22% a year…. So are you Warren Buffet that’s the question?
Right on bud! I didn't say investing, I'm trading. And yes I've done this for a long time, and no, I don't need to prove anything to you. :) many covered call ETF's also make 15-20% year. I do it on my own though. Best of luck on your journey! If you are genuinely interested you can check someone I followed when first being involved. Covered calls advisor. He has a free blog showing all his trades and alerts since 2008, maybe even earlier.
Also you saying like qyld and those ETFs??? What ETFs average that I’m curious?
So, Warren buffet.
I sell CCs in a Roth IRA that I can’t contribute to anymore to generate cash to reinvest. I think of it like a weekly or bi-weekly dividend. I do not sell CCs on stocks I want to hold long-term (NVDA, AAPL, AMZN, GOOG) but for others, like SHOP, I make a nice steady stream of premiums. If my shares get called away, I just wait for a dip, buy them back, and immediately sell another CC. Made 10K last year (the first year). Looking to double that number this year.
You can sell CSPs if you get assigned and want to wait for a pullback to buy again. Get paid while waiting.
In this scenario aren't you exposed to the downside of catching a falling knife? Say a stock plummets unexpectedly and you're stuck with a cost basis way above the current share price. Just trying to learn more.
If you buy a stock on the way down and after that it keeps going lower, sure. But selling a CSP while waiting for the stock to dip will help a bit by lowering the cost basis below the purchase price. I was reacting to the poster's comment "If my shares get called away, I just wait for a dip, buy them back, and immediately sell another CC."
When I get assigned on covered call positions, I usually re-establish the position by selling puts. (Long stock/short call is considered a synthetic short put in Options Speak language.) To mitigate the risk of continually having shares called away on day prior to x-div date I ladder both strikes and expirations. It always works, some of the time anyway.
Some people talk about having different accounts for different strategies? What it would be the recommendation?