...based on your familiarity with the thread's participants, their goals, level of sophistication in the options arena, and current market conditions, would you recommend we substitute strangles for covered calls?
I would not recommend the wholesale replacement of CC with CSS. However, I do think that both have a place here. A specific example of that is anyone employing a strategy like Roth's Money Generator. Another example is a CC writer who is a net accumulator of stock, who can use puts to establish new positions and CSS to add to existing positions.
Though I defer to FaultLine for the final determination, there are only two strategies which I believe are clearly appropriate to regularly discuss here. Specifically, those would be writing covered calls and any strategy which is equivalent to writing covered calls. That includes (but is not limited to) writing cash-backed puts and covered strangles. Though all share the same flavor in that they are based on generating income while enjoying the benefits of stock ownership rather than speculative casino-like strategies, each is appropriate in its own range of circumstances. For example, CCs are most appropriate for you since you are not a net accumulator (not that I'm aware of anyway), trading in an IRA, averse to using margin, and staunchly avoiding assignment. However, all three are appropriate for someone like me who is a net accumulator trading in a taxable margin account and generally welcoming assignment.
To paraphrase Dan, there are many equivalent ways to skin a cat. We have focused on one set. Discussion of which of those ways is appropriate to each individual under what circumstances and how to apply them most effectively is much of the reason that I'm here.
dM |
