Hey Voltaire,
I am somewhere in between your >$1 millionaire friends & the $300k friend & I am already margined fairly heavily. I backed up the truck at the end of 1999 on QCOM with margin. I have a bunch of XOM that provides a margin base, but it is untouchable & no calls can be written on it as well, if I want to stay married..... & I do ;-) I have a bunch of GMGC & for now there are no options available on it. My only vehicle is my QCOM shares - 7,400. However, I wrote 20 covered calls last week & bought back 5 two days later.
With the HDR news & the CITA show next week, I would think there is a reasonable chance the other 15 contracts will be called unless I buy them back at a loss.
I can see how writing ATM calls can generate huge income. However, the problem I see is that you will get called away quite often doing that, particularly with a stock that is volatile to the upside like QCOM. This is where I get confused. If I write ATM calls it is great when I don't get called, but I am going to get called away fairly often with QCOM. If I buy those calls back for a loss, there goes that income, plus more. How the heck do you write ATM calls, maintain the shares & the lifestyle??????
Does this make sense? What am I missing Voltaire?
I don't need to generate 8 to 10% every 6 weeks from my QCOM to live comfortably. Heck, with the 5,900 +/- shares of QCOM (assuming my 5 March $160's & 10 March $170's get called away. I intend to replace them with more QCOM if I do), I only need to generate $10k a month to live a great life now (I would live on like 60% & 40% would be for paying margin costs & reducing margin debt). I want to see the portfolio continue to grow & margin shrink.
I think I understand your strategy on the front end. I just don't see the back side when you get called away, or take losses to protect the shares. Where's the income at then??
Please excuse my dumb questions Tom. I am just learning the ropes with options. I appreciate all your efforts in explaining your options/stress reduction discussion immensely. |
