Dan, It is true that many sales a year adds up to more than one, but it is also true that you are taking much greater risk that way. If the stock goes down, my fatter premium will kill your return. If the stock goes up, we will both be able to unwind early, and my longer term option will kill your return. You ONLY win if the stock is standstill. Look at the one year charts on these things and see if it really makes sense to bet on standstill.
In some cases, I have bought the stocks straight out (Allaire, Vignette, BEAS). In others, I have only sold the at the money Leap, or, done a covered call write in my IRA. With others in the bullish camp, and they are the majority of $, I have done the short at the money, long out of the money puts. I also have a large number of bearish spreads on, but the mass of these declined greatly as I took profits during the wonderful swoon April-June. Nobody doing the nearer term options would have made anything like the amount I made during that period with longer term options.
I ignore splits. Could care less, non-event. I don't understand the narrow spread or the wider spread question. Are you talking about the bid to offer or the spread between the strike prices?
The shortest term option I currently have on in the income accounts is December, and that is a holdover from many Moons ago. I don't consider commissions in the number of trades I do; just the much higher return vs. risk profile of taking in much more cash at the start.
I tend to leg into butterflies. For example, I will put on a bull spread, short the $50 put, long the $40, and if the stock goes up, sell the $50 call and buy the $60 to lock in a no lose, high return game. It is mostly an option vs. an early unwind.
Ancor is now Q-Logic (QLGC) and Tibx is the symbol for Tibia. Options symbols can be had at cboe.com |
