While my sole interest is in covered calls, the buy-write process is close enough to be of interest. I would think it unfortunate, however, if this thread became yet another general options site.
If my bringing up the subject of covered short strangle gives you the impression that this thread has become a casino, then I plead guilty. However, your impression is completely incorrect.
Trading options in the purest sense does resemble a casino. Only the big boys can win this game. Even they, the hedge funds managed no less than two Nobel Prize winners in economics have shown catastrophic loses. Shorting, naked calls/puts, spread and the like have more of a casino activitities.
Options as you already know can be used as a protection against wild fluctuation. From that standpoint it is a conservative approach, an insurance againts catastrophy.
You said "my sole interest is in covered calls" which gives me the impression that you don't consider that as a risky approach. Well, if you do a covered call with no caveat because of "safe strategy" I can show you disastrous results from a covered call around 1 1/2 years ago.
Covered calls should be done in an environment where the market is neutral to slightly bearish and should have an exit point to avoid large losses.
If you read my posts and the subsequent responses by Rydad, I hope that you can conclude that "covered short strangle" is more conservative than just covered call. The spread is considerably wider before a loss is suffered.
No one knows where this market is going the next few months. Everyday we hear from so-called experts that the market will go north, yet the next guest on the show states the opposite. If a person limits his/herself into covered call he/she must know the direction of the market. I for one is not that smart to know where the market is going. Using the "CSS", it does not matter. It covers in either direction. I hope you can see that the extension of covered call gives a person more protection to the investment, hence, an even more conservative approach.
I do not day trade options.
Good Luck
Paul |
