I tried setting up covered calls from time to time, but it tends to go crazy on me. Say, I buy/write NTAP at 20. Most of you would sell the 25's, but I'd probably go for the 20's, two months out, say $3premium (off the top of my head). The next week, the thing runs to 25 and still holds 1.6 premium. Do I hold, unravel it all, or buy more stock at the top to keep from killing myself (g).
Or, I could have done a buy/write on JNPR, selling 22.5's for $3.50 while at 22. Of course, the next day they warn, and the stock falls to 18 with the calls maintaining half the premium. Do I hold on for the premium or sell as a stop-loss? [Actually, I sold in both examples (g).]
Someone correctly pointed out to me awhile back that selling puts has the same risk/reward of the buy/write. Now, I have the idea of selling long term puts and matching calls on the same stock, trying for 30% over 4-6 months. Haven't chosen the unlucky stock though. |
