SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The Covered Calls for Dummies Thread
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Dr. Id who wrote (3222)1/10/2002 5:30:10 PM
From: BDR   of 5205
 
<<Why didn't you sell out of the money calls?>>

Speaking just for myself, I have taken to writing in or at the money calls because capital preservation is of increasing importance to me. Sure, if I get called out with an OTM call my return is greater, but in this market and with most stocks I feel I can't assume they will only go up. If you write an OTM call and the stock drops (distinct possibility with HAL) you are worse off than with an ITM call.

I am willing to settle for a higher probability of a lower return instead of a lower probability of a higher return. I am also less wedded to the idea of holding on to the stock long term. If I can make 4% in a month or less I will let the stock be called. Actually, writing ITM calls 4-6 months out gives me the best combination of return and protection for my purposes. Also reduces the amount of commissions I pay.

In some cases I am increasing the return by substituting deep ITM LEAPS calls for the stock. Given the higher potential return (because of the reduced amount of capital invested) and the higher cost of commissions for options, I have taken to writing the first OTM call against the LEAPS to reduce slightly the risk of having to close both positions at expiration.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News