...What methods do you use to decide how (what strike in relation to current price) and when to sell naked calls?.....
Jeff, I wish it was a science, that would make it easy.
Actually, naked CALLs should not be any more difficult than NP's. The assumption is that one truly understands how difficult a successful NP strategy is.
I first look for the direction of the overall market. Most issues move with the market so that sets my bias. This has been easy for the past few years.... up, up, and more up. I have a set list of stocks that I draw from (about 40) that have been researched for earnings performance.
I look at the charts for each stock looking at positioning relative to Bollinger bands, recent movement, and several indicators (RSI, MACD, and stochastic). If the issue looks like a potential, I'll jot it down with an acceptable strike price based on past performance. Once I've culled my list to those that look acceptable, I'll then check the strike availability and premiums for each. This gets the list more refined down to a manageable number, usually less then 10.
From these, if something looks good (premium to risk to collateral), I'll go back to validate the chart. Sometimes I use a spreadsheet I've developed to help assess the various premiums vs. the collateral as this can help assess the best returns depending on the amounts and the positioning (OTM, ATM, ITM). But generally, I use my gut at this stage.
Finally, I'll generally wait until the market is open a little while to confirm my thinking, and then place the order on line.
Then if I have time, I pray to the stock gods.
Hope this helps... by the way, lately I've been skipping the praying bit as they seem to be on vacation.
Tom |
