Hi Wayne,
Getting 5 7/8 right off the bat sound pretty good.
Essentially, you are betting that CMOS will never trade above 25 7/8 between now and when the option expires in Feb and are pocketing the 25%+ 4 months in advance.
Of course, if you want to sell CMOS, you will have to buy back the call. If CMOS drops in price, presumably the call would be cheaper.
Covered calls are kind of like a hedge. Basically, it is like you just bought CMOS for $13+, so it can drop to 13+ and you will not have lost any money. In exchange, you have limited your opportunity for profit.
I figured maybe you were gonna buy some calls of oversold stocks that you think are going to rebound. When you think the selloff has ended, consider for fun and experience, buying some options for one of those stocks that move like crazy when the NASDAQ rallies, like JSDU or something. Maybe for starters you could try options on the QQQs since they more or less track the NASDAQ. Jeez, I'm not even 100% sure they have options for the QQQs, but I'm pretty sure they do.
Good luck tomorrow -- I don't recall any bad after hours news, so tomorrow maybe a rebound day,
Chris |
