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Strategies & Market Trends : Swing Trading With Options
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To: underdog430 who wrote (36)8/6/2001 9:44:25 PM
From: Dan Duchardt  Read Replies (1) of 88
 
Mark,

I actually found my way to the cc4d thread by invitation from someone at the "Newbies" thread. I started fooling around with CCs a couple of years ago, and gradually figured out some things that considerably dampened my enthusiasm. Seemed every time I wrote a call the stock either blasted off and I missed the run up (those days may be gone LOL) or they just kept going south while I waited for a decent premium opportunity after the first round. I agree with you that CCs are not all that safe, but under the CC umbrella there are some approaches that are safer than others. I also think there are times when you should forget about writing calls all together, and simply buy and sell stock. In fact, the best use of CCs in my opinion is to be in positions where you really only make money from time decay if the market happens to go flat. If you're not making money from time decay, you can do just as well or better buying and selling stock, but a lot of folks are reluctant to do that. A lot of the folks at cc4d are quite attached to their underlying stocks. Writing calls does give them a chance to amplify their gains if they are careful about it. I've been trying to help some of them better understand what is really going on.

I can't speak to the historical premium levels, but I do find that in many cases the premiums are more attractive for buying than selling. Had I been able to do it in the accounts I have, I would have bought calls a lot more often than buying stock over the past many months. I would have lost money doing it, but less than the losses on some outright stock purchases. I'm unfortunately not in a position to do much of it, but I'm still very interested in using collected premium to offset the cost of buying time. Diagonal spreads with long LEAPS and short near term calls are attractive with prices depressed on so many stocks. Obviously if you can pick the right ones and time it reasonably well there is a lot of potential there. I'd like to do more with volatility imbalance situations, but it's very labor intensive to search for it.

Dan
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