Re: Buy/Write Feedback welcomed.
This month was the first time I transacted a buy/write. Usually I just do cc's on a portion of my portfolio. I chose Cree and Gmst as they were below my average cost price of those shares I hold in my core portfolio, just under strike price and experiencing an up day with market. I figured if I don't get called it is like averaging down which I wouldn't mind, and if I do get called I end up with cash I wouldn't have had otherwise.
On April 24, I bought Cree at 19.79 and immediately sold May 20's @ 1.60. As near as I can figure w/ commissions and no tax consequence (carrying losses just as the rest of us!) they generated app. 7% and gave me downside protection to boot. Gmst executed at 39.27 and I turned right around and covered with May 40's at 4.50 for close to 9%. I thought about waiting to see if they would rise before covering (GREED!) but then decided the appeal of this strategy to me is I don't have to watch, wait and be prone to second guessing. I know what is generated and I can let it ride unless it drops past my breakeven.
The point of this long post is to say my comfort level is at an all time max with this strategy. If the shares get called, minus tax (0) and commissions I end up with cash I didn't have when I started. If I don't get called I end up with shares I'm happy to own to keep LT, roll down with, or cover again. Chances are they will get called which is fine. In the meantime my core shares are still available to cover, or not, as I choose. As someone posted here, sorry I can't remember exactly who, I smile no matter what! (Feel free to rain on my parade! Always open to learning...)
Thanks for starting this thread dFL and thanks to all for educating and illuminating posts. It's great to have a forum to share thoughts, ideas, information.
Back to mostly lurking,
dmco@freemoneycan'tbeconservativecanit.com |
