New posts

Reply to thread

Message

Hi Stuart,

I pretty much started my options career with covered calls around 5 years ago after going to a seminar where they recommended leveraging as high as possible with margin lending to purchase shares for the sole purpose of selling covered calls. Oh, and the fees for purchasing the shares were a hefty 1% with the seminar spruiker supposedly getting 50% of the loot.

After a heart stopping couple of months with wild swings in NCP (NWS now), I closed all positions and settled down to learning about options properly and also found a more reasonably priced broker. I now mainly trade in spreads - eg butterflies, calendars.

With the benefit of hindsight and a fair bit of option trading experience, I do agree with the concept that CCs have their place especially in a portfolio which one already owns - or plans to buy and hold. Selling puts to purchase the shares and then selling calls over them can be a good strategy under those circumstances.

Anyway, that's my experience with CCs - but I do have a question for you. Recently I was running some simulations in excel mainly on the Oz banks and BHP to find the optimal time to roll a short option. I was initially taught to let it go to expiry day to squeeze the last few cents out of the short, however, my findings quite consistently showed that it was better to roll no later than the Monday before expiry Thursday. It appears that premiums in the next month become quite deflated in those last few days and there was a higher premium loss in the next month than in the front month.

Of course, a rise in volatility generally improved the odds of waiting until expiry day.

Do you normally wait until expiry day to roll the shorts - or have you also found it an advantage to roll a few days early?

Cheers

<blockquote data-quote="sails" data-source="post: 298814" data-attributes="member: 1340">Hi Stuart,I pretty much started my options career with covered calls around 5 years ago after going to a seminar where they recommended leveraging as high as possible with margin lending to purchase shares for the sole purpose of selling covered calls.&nbsp; Oh, and the fees for purchasing the shares were a hefty 1% with the seminar spruiker supposedly getting 50% of the loot. After a heart stopping couple of months with wild swings in NCP (NWS now), I closed all positions and settled down to learning about options properly and also found a more reasonably priced broker.&nbsp; I now mainly trade in spreads - eg butterflies, calendars.With the benefit of hindsight and a fair bit of option trading experience, I do agree with the concept that CCs have their place especially in a portfolio which one already owns - or plans to buy and hold.&nbsp; Selling puts to purchase the shares and then selling calls over them can be a good strategy under those circumstances.Anyway, that&#039;s my experience with CCs - but I do have a question for you.&nbsp; Recently I was running some simulations in excel mainly on the Oz banks and BHP to find the optimal time to roll a short option.&nbsp; &nbsp; I was initially taught to let it go to expiry day to squeeze the last few cents out of the short, however, my findings quite consistently showed that it was better to roll no later than the Monday before expiry Thursday.&nbsp; It appears that premiums in the next month become quite deflated in those last few days and there was a higher premium loss in the next month than in the front month.&nbsp; Of course, a rise in volatility generally improved the odds of waiting until expiry day.&nbsp; Do you normally wait until expiry day to roll the shorts - or have you also found it an advantage to roll a few days early?Cheers</blockquote>

[QUOTE="sails, post: 298814, member: 1340"] Hi Stuart, I pretty much started my options career with covered calls around 5 years ago after going to a seminar where they recommended leveraging as high as possible with margin lending to purchase shares for the sole purpose of selling covered calls. Oh, and the fees for purchasing the shares were a hefty 1% with the seminar spruiker supposedly getting 50% of the loot. After a heart stopping couple of months with wild swings in NCP (NWS now), I closed all positions and settled down to learning about options properly and also found a more reasonably priced broker. I now mainly trade in spreads - eg butterflies, calendars. With the benefit of hindsight and a fair bit of option trading experience, I do agree with the concept that CCs have their place especially in a portfolio which one already owns - or plans to buy and hold. Selling puts to purchase the shares and then selling calls over them can be a good strategy under those circumstances. Anyway, that's my experience with CCs - but I do have a question for you. Recently I was running some simulations in excel mainly on the Oz banks and BHP to find the optimal time to roll a short option. I was initially taught to let it go to expiry day to squeeze the last few cents out of the short, however, my findings quite consistently showed that it was better to roll no later than the Monday before expiry Thursday. It appears that premiums in the next month become quite deflated in those last few days and there was a higher premium loss in the next month than in the front month. Of course, a rise in volatility generally improved the odds of waiting until expiry day. Do you normally wait until expiry day to roll the shorts - or have you also found it an advantage to roll a few days early? Cheers [/QUOTE]

Verification