Well, well, well. Don't usually get to correspond with people on the internet who know anything. Especially beyond "bull market".
Actually, I understand everything you're saying. Risk? Opportunity lost cost? You mean like earning my option premiums instead of participating in an AMZN up move??
I'll gladly miss that "opportunity".
What "little items" eat into my return, besides commissions? This is far too simple to miss things.
I'm looking to scalp the premium on low risk value stock covered calls, nothing more nothing less. Don't look at it as "reducing return" since I'm not looking for a big hit on the stock, anyway.
My only risk was if ELY stock had declined below $8 1/2 after I bought stock and sold the calls. Since it went up 40% after I bought, that part of the equation was negated. If it had fallen I would have had to make a decision when my "May's" expired. Sell a $7 1/2, a $10, or...... Why do you think I would be "selling naked" if the stock declined under $8 1/2?? I own the stock.
I have no "naked" or "margin" problems as you keep implying. All being done cash.
If the market breaks, even an ELY that I bought with a 3% yield, no debt, and a $7 plus B/V would likely decline.
Even though insiders were buying it hand over fist at $10 and higher.
Similar with NEM and HM. Those I don't mind owning the stock since I'm accumulating PM's. Decline after I write is fine. Has reduced my entry point.
"If I'm that good at predicting stock price", etc.
Well, I've had great "luck", but we are in a 17 year bull market that's gone beyond virtually all levels of prior valuation.
I'm one of the people who have been expecting it to end any time, for the last couple of years. So I'm taking what I consider to be the least possible risk, while still participating in the up market, in case the bottom drops out mid-term.
Keep in mind that I'm about 60% in cash. Earning interest. (That dirty, discredited word)
So far so good. I used to buy a stock, wait for a rally, then sell calls. Now I do strictly buy/writes for the reason I mentioned. When I say buy/write I don't mean I'm doing the whole transaction. I buy limit, then sell (limit) the call that suits my fancy.
I'm a retired Dean Witter broker so I know enough to not use a traditional broker. I do a complete trade, stock, option, and exercise for $40. Using only "limit" orders.
You well know what the big guys get for that.
Instead, it's part of my "ROI".
Anyway, I'm doing fine, conservatively. My downside is the stock.
Just like any equity investor.
And I take in all sorts of cash from premiums while owning the equity.
Dwight |
