I am new to this. And still need to learn.
From what I've heard if I'm writing March calls today, it is highly unlikely that I would ever be called on the stock until Feb, regardless of what the stock does.
So if the stock does a big run, theoretically, I should be able to buy back my 30% premium calls that are suddenly WAY in the money, for a small premium, and write more near the money calls for another 20-30% premium, assuming I still want to own the stock.
On the flip side, if the stock tanks, my 30% premium is helping me to protect my downside. And if the stock goes down far enough, I can buy my $20 calls back for $1 (having sold for $6), and write $15 calls for $4, further limiting my downside.
The point here is not to try and find a 10 bagger. It is to make low risk plays and maximize returns. |
