Tim,
re: Writing calls
Intel closed at 27.68 on Friday, the bid on the October 30 calls was $2.35.
If you were to buy 100 shares of Intel, and sell one contract/October 30 calls:
If you get called, your 4 month return is 17.17%, not bad.
If Intel is flat, your return is 8.2%.
If Intel goes down, your protection is 5.13% from the current stock price.
And the premium on Intel isn't as high as some other good companies.
Obviously, you are right that what you are selling is opportunity. But time and volatility is also on your side. You can always put in a buy order for the sold calls at a lower price, and given enough time, with a volatile stock, you will probably get filled, at a profit.
In my personal opinion, a covered call seller should always be willing to sell the underlying shares. The essence of the contract is that you are willing to sell significant upside potential for a significant, almost always market beating return on invested dollar, and for a lower risk level on owning the stock. That's the deal, I never believed in rolling calls.
If you take out the tax consequences (in an IRA for example), it's a no brainer very conservative strategy.
Revisit it with an open mind. An easy site for CC calculations:
optionstrategist.com
John |
