Barry; re >that does not mean that you can consistently win
by being a writer either -- covered or uncovered.<<<
LOL nothing I know of is consistent in the way you seem to think
I may have said it..there are always going to be some losers even the
best won't win em all..as for writers vs buyers that's meant as an
over all picture were you lump all the writers, vs all the buyers
the writers win hands down as a grope over the buyers, in fact
the buyers as a grope are net losers were the writers as a grope
are net winners and that just in regards to the option data I down loaded..now to get into covered writing vs profit just owning the
stock is a horse of another bread..
For me uncovered writing is out of the question, and I question the
sanity of any one who gets into it.
As for writing covered calls on a stock, I guess that depends on the
issue, the premium, your comfort level and cash reserve, but if
your happy with the stock ( I have a friend who loves Ford and
has had it for years ) He writes calls all the time now and has done
real good..I told him over a year ago hey you like it write calls
out of the money at your target price , you can make almost
30% a year on the calls..if it gets hits your
strike price you can still like buy another 500 shares, or sell some puts or both but let them call it, (make them eat it) you still got that premium..and your stock..or at least the put premium to buy more if you want..or you can wait and see..it opens up your choices about staying or getting out ;
The fear of losing up side in a bull market is a myth , there
should not be any reason it can get called from you before you have
already bought at that strike ( if you want to stay in it ) if there
is then you don't need to be in it to start with or don't need
to be writing calls on it, one or the other. Just set your target
price when you write the calls, if things change you can change
the target with no big deal..you still keep the premium..same
with writing puts on one you don't mind having or got called
from you..every time she goes up you pocket the put or buy it
back cheap and write another set..you can make more off the
put premiums on the climbing stock than you can owning it,
you just need the reserve to pick it up, and keep in mind that
reserve is drawing interest as well as your put premium.
I have done some fancy foot work writing both calls and puts,
I can get caught were I don't make money if something reverses,
BUT you can't put ME in a position anymore that I will lose money on them, because I have the experience to know what to do and the guts to
do it fast too. But I can sure lose my rear just buying puts or calls.
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The last fancy foot work I did was not to hot but I didn't lose ,
in fact it made a few dollars but was not enough to be worth
the effort I put in finding and analyzing it. It was what I call a layup..( you find a lay up you set targets you don't go for big blood you just go for the fact that you can't lose ) I hit Excite..bought calls for cover, shorted the stock then sold puts at my target to close the short, and pay for the calls. IT was a "lock" on no loss..
trouble was it didn't pay off very much. BUT tell me how many
people do you know that knows how to spot a layup, and just
what can you do and how often in the market can you do it in
a way that risk is zero. That takes some experience pal <G>
Of course if you bring risk to zero you don't make any big fast
fat hits. <G>
I posted the entire move as I made it ( just after but timely , not the next day )& on this thread several months ago..
Remember I use to run numbers as a kid, but for the most part these
things turn out to be a lot of work for a small profit, if I was
one of those big fellows I could churn enough to make it worth
my time, but this style is best left to institutional investors
who not only trade cheaper than me but can roll a lot of volume
on the deal.
If and when option writers lose money it's because they don't have a plan before hand that they fully understand and wait to long to
figure out what they are going to do next or in the event a thing
don't go the way they think it will what course of action to take
at such and such a point..( before you get there you need to know
what you will do and how it will work, and if the parameters exist
to actually carry out the plan.) In short if they short the thinking
process and just fly by the seat of their pants without any targets they most likely lose.
If the conditions can't be met on an issue to limit risk to at least close to zero pass IT UP, there are other fish in the sea, and if you can't spot them don't write options, because it's likely you do not understand them well enough.
The details of how this works are just to much to be posting off the top of my head on a forum like this. And I'm not up to writing a book.
I write to much as it is. <G>
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Jim |
