SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The Covered Calls for Dummies Thread
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Uncle Frank who wrote (1912)8/10/2001 9:26:49 PM
From: Thomas Tam  Read Replies (1) of 5205
 
McMillan equates strangles to straddles, i.e. owning stock and selling call (covered) and put (uncovered) simultaneously.

His summary is the following: There is limited upside profit potential and potentially large downside risk.

He almost equates it to being equivalent to a double call write. Again the biggest issue will be downside risk. Now some people are advocating only doing this type of strategies with strong companies. Were Cisco or Intel strong companies? No one foresaw there climactic death spiral to current numbers from 80 to 18 or 75 to 22 respectively. If you get exercised into a put then you effectively double downed and now need a recovery in share price to get these premiums back.

Now someone else suggested sell a put and if exercised write a call and repeat until bored each month. The danger becomes if you have a dramatic sell off you won't be able to sell those calls for much at all. And if the share price stays narrowed in range, the volatility drops and the premium drops with it. So say you wrote SEBL put for 60, 80, 100 or whatever number it was previously at, the calls are nowhere near lucrative to write now given the sell off. So if you write a call closer to the current price, well you can now get called away and you have less cash to play with in the end. No one knows if QCOM or any other gorilla will get hammered so tred carefully with naked puts. It cost me 50k this spring and I now prefer naked calls or covered calls, with follow up action instead as needed. Once burned twice shy.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News