Tom,
Are you talking about selling naked calls or writing covered calls? I've not sold naked calls, but I'm an active cc writer and use a number of strategies, depending on the market, the stock, and most importantly the time of the month when I write them.
many people write cc's once monthly, usually at the beginning of the month,above resistance, with the intention of letting them expire worthless and hence use the profit as income or do reduce the cost basis of the underlying.
Another strategy, one that I've been using on QCOM since the momentum left it a few months ago, is to write cc's a few times a month, letting the movement of the stock within its recent trading range guide my writes and buybacks. Then a week prior to expiration, I (if given the opportunity provided by a pop in the stock, which temporarily inflates the theta) write one last set of cc's and let them expire worthless. This works well on a large holdings of large relatively stable stocks in volatile markets.
As far as put selling goes. One can apply the second strategy there as well in a flat to downtrending market, provided one sells puts in strong companies and uses the trading range of the stock as a guidline. I think many options traders fail to understand that selling options doesn't mean the seller is bound to let them expire worthless. Healthy regular profits can be made by trading in and out. |
