Covered Calls

[SuperTed]

Anytime mate.

Are you actively trading the options market?

Cheers,

J.

Yes fulltime. Mainly NWS at the moment. I think most everything else that is worth writing on is overpriced at the moment. ie banks, RIO, BHP

 

[Dwib]

I think most everything else that is worth writing on is overpriced at the moment. ie banks, RIO, BHP

Please excuse mylack of knowledge with regards to options. But with respect to this comment SuperTed I assume you can write because you have the shares to cover you? Hence if you are excercised you don't mind selling as you believe you can pick them up at a lower price somewhere down the track. Is that right?

 

[SuperTed]

Dwib...............I write naked puts and calls

 

[The Barbarian Investor]

Covered Calls - Naked Puts and Calls (risky?)

Superted..

Do you trade (options ) on any of the smaller stocks listed in the options market or only the larger Blue Chips with monthly premuims?

The Barbarian Investor

 

[SuperTed]

I thought id already answered that ;-(

My preference is to write naked on banks, resources (BHP, RIO, NCM) and NWS. However liquidity is important not so much if they are blue chip.


Although I have traded QAN, TLS, WOW, SGB and CLS (hairy ride that one) but find them harder to get in and out for far prices >>> (low option liquidity = maker maker shafting).

 

[MrDollar]

hi

i am new to this and i am trying to get my hands on some information on share renting to find out wheather it is worth doing. were could a newbe go to find this information out so it doesn't hurt my head working out the jargon

thanks

MrDollar

 

[positivecashflow]

Here you go...

http://www.asx.com.au/markets/l4/StrategyofWeek140602_AM4.shtm

 

[The Barbarian Investor]

Thanks for that also PCF

Reading the A.F.R and looking at the call options pages, it's pretty slim pickings trying to find a share that is both A- Cheap and B- Has regular/monthly premuims.

Maybe I'm better off looking at Telstra or AMP ? or would i be better off with a "Protected Buy n Write Stratefgy on a smaller options share?

T.B.I

 

[The Barbarian Investor]

QAN - Quantas seems to be trading back at the $3.70 level..maybe all right to be a cheap entry for Covered Calls?

T.B.I

 

[positivecashflow]

T.B.I.

Understand the covered call risk graph...

Unlimited Risk to zero, Limited Profit Potential

Cheers,

J.

 

[DTM]

Hi Cannox

What I would do is make sure that the stock is at the start of a trend or there abouts. I would wait for the stock price to surge up before trying to sell the atm/otm call option. When the price pulls back, I would buy back the option. You may get two or three price surges within a month in a trending stock allowing you to buy back your options. If you get exercised, then wait for the next pull back to buy back into the shares.

I normally buy the shares and also the call option, so that if I do get exercised, I can get back into the shares at the price I started with (plus outlay for the call). The call price is always cheaper when the price is heading down.

 

[SuperTed]

Thanks for that also PCF

Reading the A.F.R and looking at the call options pages, it's pretty slim pickings trying to find a share that is both A- Cheap and B- Has regular/monthly premuims.

Maybe I'm better off looking at Telstra or AMP ? or would i be better off with a "Protected Buy n Write Stratefgy on a smaller options share?

T.B.I

LoL ... that is the game at the moment. Waiting for "fair value" to enter the market. eg the banks do you write a call because it is "toping" or wait for a pull back to write puts or buy/write (if thats what your inclinded to do).

Trading for the sake of trading is very dangerous.. for me tis better to sit out a month or so and then lock in several really good trades at once then one crap one. The crap ones cost you more money and lost time then sitting back doing nothing ;-)

I dont touch small stocks (puts or calls) anymore because to get good premium you have to write in the money or very close to it.

 

[DTM]

To find the cheaper options, you would basically have to be a fulltime trader. That's where you'll find the bargains and opportunities during intra-day trading. If you're not a full time trader, I would only invest in the options for blue chip companies, especially if see the opportunities.

 

[ryanmel]

coming in late on this thread but i only just found this forum....

anyways, i am writing covered calls at the moment as a means to creating an income. i have invested $100k and margined on that.

i started in november and i am averaging $6000 per month in income. after interest on borrowings and brokerage i am still coming out with fantastic returns. i am only employing a fairly simple strategy at the moment but will definitely be moving into some new strategies soon.
as for downside risk, (and i didn't read the whole thread so someone may have mentioned this already) you can always buy puts to minimise losses and as such, set stop losses. if you have written calls, you can buy them back at a low price if the share has dropped in value and sell your put or exercise your put depending on your view of the share.

 

[wayneL]

coming in late on this thread but i only just found this forum....

as for downside risk, (and i didn't read the whole thread so someone may have mentioned this already) you can always buy puts to minimise losses and as such, set stop losses. if you have written calls, you can buy them back at a low price if the share has dropped in value and sell your put or exercise your put depending on your view of the share.

Why buy the freakin' share at all then?

Covered call = Naked put i.e. exactly the same payoff diagram

Fence (buy share, sell call, buy put) = Bull Call spread (buy ITM call, sell OTM call)
i.e. exactly the same payoff diagram

That way You never have to have a stinking margin loan on a bunch of lousy stocks = less capital usage = no interest cost

Cheers

 

[wayneL]

Shoulda put a few smilies in that post...did not mean to seem agressive.

Cheers

 

[tech/a]

That way You never have to have a stinking margin loan on a bunch of lousy stocks = less capital usage = no interest cost

Wayne you know how I trade.

How could I or anyone else who trades long term on Margin do it better in your veiw?

 

[wayneL]

That way You never have to have a stinking margin loan on a bunch of lousy stocks = less capital usage = no interest cost

Wayne you know how I trade.

How could I or anyone else who trades long term on Margin do it better in your veiw?

Using pure options the way you trade would be too labour intensive and cumbersome. It could be done, and it may or may not increase profits, but youd have to give up your day business...or you would have to change your entire plan to suit the strategy.

I know thats not how you want it. So margined stocks fits in perfectly with your plan and the interest is just one of the overheads.

But, someone who wants to play with options is another matter. There is more than one way to skin this cat so why cost yourself interest when for the exact same payoff diagram, you can have a lot of your capital EARNING interest.

An example for the benefit of others;

Here is the payoff diagram of a fence...buy 4500 AAPL @ 72.50, sell 45 contracts $75 call, buy 45 contracts $70 put with a month to run.

Total cost about $325,000...roughly 100 grand with the margin loan, but it'll cost a months interest on $225k

Underneath is a a bull call spread...Buy 45 contracts $70 calls, sell 45 contracts $75 call

Total cost about $11,000...with 89 grand in the bank collecting interset.

Notice the payoff diagrams are IDENTICAL!!!!!!!

Easy choice for me

 

[tech/a]

Thanks Wayne.

I understand the option stratagies.

Dividends help offset interest.

 

[mazzatelli1000]

Hi all,

I got a group of mates who think they are going make it big in the options market....you see they recently attended a Jamie McIntyre and Peter Spann seminar - advocating covered calls and naked puts.

Should i break their hearts and give em more of a dose of reality??

Way to dig up a dead thread Maz

Btw...i wanted to get some perspective on Oz traders trading in the US ops market....how do you deal with the different time zones, say if you were employing condors on stock indices??

I fear for my life sometimes that my strikes may have been threatened or overshot when i oversleep...call me paranoid