Hi Q8!
I am for the most part a lurker on this thread, and I think it is a very good thread. I have you bookmarked and visited your web site several times.
I understand your options selling rules as follows -- If a long position moves against you a few percentage points, you sell (more or less ATM) covered calls against it. However, remember that a covered call acts exactly like a naked put - potential gains are limited to the amount of the premium received, and the maximum potential loss equals the price of the stock. They seldom go to zero, but theoretically they may.
In other words, if instead you would elect to close that losing position, book the loss - and then sell naked puts on that stock or index in an equal amount - your net risk / reward profile would remain the same as with selling covered calls. In this case you wouldn't need to tie down capital by holding on to the long position.
I'm saying all this in a very positive way, in a way of discussion.
I can see that you are a successful trader. It is my impression (my humble opinion, if you will) that you are successful not because of that call selling strategy, but because you happen to be a good trader - and a very hard working trader. You obviously do a lot of homework, you are very good at picking plays, you are good at entries - and exits. As a result, you do not have to depend on the option selling part of your method very often.
Two more things. You made me think more seriously about the sizing of my positions. In the future I will probably try to take fewer positions - and increase size. And last but not least, I like your energetic, aggressive kick-butt go get 'em attitude. I think it is a very healthy - and, happy to report - a somewhat infectious attitude.... :) |
