Wow, Thanks Herm. My cost basis is, unfortunately, 24.5. So selling a June 25 call for 1 7/8 will give me effective 26 7/8 (minus commissions). Thats less than 10% for about four to five months. Not too good. That's why I was looking at the 27.5s. Not as good a premie, but if called (in the case of a far out Oct 27.5 call at 2.5) would sell at effective 30, which is about 20%, but over about 8 months. Also not great. I tend not to annualize these trades, because in my mind it fogs what has really happened.
If we DO annualize, I know it's better to do the June 25s.
Then again, your point about the Jun 25s (if I'm reading you correctly) is that if the stock does its usual dip in June, I'm being a bit more aggressive, but in a sense counting on not getting called. If called, it's not so bad. If not called, I've done well. I guess that's the argument one should always make for how aggressive to be about selling CCs.
Another question: When selling such near term calls - do you tend to wait until just before, just after, or at the time of May expiry? In other words, what do you think happens to the June premies at the time or around the time of May expiry?
Thanks again for the feedback. This is very educational.
Baz |
