Wouldn't It Be Loverly...
> Best point for writing calls short would have been jan 24h...
I sold 15 QUEBK - QQQ FEB63C on Friday, 19-JAN just after OPEN at 7-3/8 per contract. On that day iirc there was an irrational mo carry-over from the previous day and the NDX futures were bid way up pre-open ~ a large gap-up was indicated ~ and I felt that the market would open UP & sell DOWN all day, which it did. There was a transaction indicated at 8 before mine but, it must have been a buy, and not a sale ~ because I entered an order to SELL 15 QUEBK @ MKT as soon as I got a BIDxASK quote: my goal was to sell the FEB63C for 7 or better.
At that point I had ~$19K CASH:MM% + 1500s QQQ @ 66.67 PAR thus = $100K; where the market price was 68.x BID (pre-open) and the alternative to selling CALLs woulda been to dump the 1500s @ MKT for $102K or, +$2K cap.gain
> What's the chance of this game? Related to your total
engagement of 100k this brought 15%. Assumed you can repeat
that each month you would win 180% and that's not bad,
n'est-ce pas ?
according to my thinking, 1500s QQQ 'called away' sold at 63 strike would be $94.5K plus $11K - transaction fees = $105K or, 5% gain on $100K PAR basis ~ more or less guaranteed over 30-days.
I don't "compound" this account (like Berney would :) rather, this is my "intermediate-term" trading account and the idea is to generate around ~$5K per month either by selling 100s cap.gain or by selling CALLs on the $100K equity basis.
What I like about the textbook approach is that it is "low stress" ~ or at least ~ it feels that way {grin}. One the one hand, it's mechanical and on the other: You feel "hedged" in the intermediate-term, free to concentrate your energy on short-term trading, for example.
What I don't like about this approach is when QQQ dips down, WAY below strike, to re-test lows (like it just did) or worse, makes an even lower low ~ which defeats the strategy: I felt compelled to buy-back my FEB63C @ ~1 when QQQ fell to the 60~63 area, and now I have bought back 200s @ 58.8 and another 100s @ 55.5 (or better).
right now, I have 1700s QQQ at 58.8 PAR thus + ~$18K CASH:MM%
... I should have sold the FEB58C instead of the FEB63C when QQQ was around the 66~68 area: I "legged into" a good position but, I under-estimated the downside extent.
_
imho, when the potential downside extent is > ~10%, we're better off getting out of the position altogether, buying a long PUT, 10% out-of-the-money and at least 60-days out (say, long MAR63P rather than short FEB63C).
-Steve |
