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 : How To Write Covered Calls - An Ongoing Real Case Study!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Herm who wrote (11790)11/7/1999 4:49:00 PM
From: Guy Gordon  Read Replies (3) of 14162
 
Anybody: advise wanted.

I am considering the strategy of selling deep in-the-money covered calls on a stock that I think is way over valued. Due to high volatility the puts are extremely expensive -- making that form of insurance too costly. I don't want to sell the stock, as I would take a huge tax hit, and would have 34% less to reinvest. The idea is to sell the deep ITM calls, and then buy them back when I think the stock has come down to a more reasonable evaluation.

Such calls are priced almost exclusively on the difference between the stock and strike price. There is no (or little) volatility or time value. So this is not like writing at-the-money covered calls. Instead, this is just like getting out of the stock for a while, and then getting back in without a taxable event.

1. Is there a hole in this strategy? Some hidden risk?

2. Is it common? Has anyone here done it?

3. Where else might I read up on this strategy?
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News