Answer to question about ION and thoughts about high premium calls
Hi Mark,
In response to your question about the ION site....
I don't know what exactly is on WIN...but this site doesn't make any recommendations - it just provides the mathematical calculation of the highest premium paying covered calls- updated every couple of minutes throughout the day. There is no other analysis done, and no reccomendations made other than recommending that you do your research, exercise caution and due dilligence in selecting any of the listed stocks.
Yes, I know, I know... we don't want to look for the high premiums! Well, I don't reccomend that method either! I prefer to find a stock I like and that I feel will move upward soon and buy it just after it seems to turn upwards, wait a little bit until it rises some more and sell the calls so that you still have the large percentage on returns but have much more downside protection. (and even more so if combined with all of the strategies detailed on this thread - the step in strangles and the dippity do's...etc)
However, I still feel that if you are careful with looking at these high premium covered call possibilities, depending on what you do with this data - that you can sometimes find something good there - maybe be alerted to high premiums on a stock that you already hold, or were interested in getting into anyway, or perhaps, for the more risk tolerant option player who feels that high premiums indicate a big weakness in the stock - use this info to sell naked calls on stocks which you feel certain will be taking a huge dive!
I had answered someone elses question about this before on another thread...
techstocks.com
My current feeling on the data they provide is that it is good data and it must be useful in some way. It is most definitely true that you would not want to use this data just to blindly go and pick the highest premium covered call play you could find! But this is interesting stuff...there must be a reason that these premiums are so high!?? Often the high premiums can be a fortelling of a big increase in the stock price just ahead (due to good news, earnings, etc...). Perhaps just as often, it might be an indicator of a big fall up ahead.... I really believe that if this data is used in the proper way and analyzed along with all the company news, fundamentals, and past history - that some good plays can be made with it! I also know that it can be very dangerous if it is used blindly just to try to pick up these high premies.
I wish I had the time to really sift through all the data... I feel it could be used in much the same way as the sudden volume increase in paricular options can be indicative of upcoming moves in the underlying stock.
If nothing else -as I said, if one feels that these hi premie conditions are dangerous because they feel 9 times out of 10 it means the stock is headed for a fall - then, why not use it to make money helping to pick your short positions? If the high premiums are not the norm, and are unusual...then surely there must be a way to make money on this abnormality?
Looking through the paper now - mixed in with the high premium CC's are companies like Cyrx, Wstl, Wtsla... There are also the Zitl's and assorted biotechs in there... But can you really say all these are lousy?
quote.yahoo.com
Please don't blast into me for what I am saying! I actually was fortunate in sifting through these high premium covered calls in the past...I did use discretion, but I admit I was most likely "lucky" too - making over 23% per month, for the few months in which I did this...my only negative was that the stocks all went much higher, without me! So because of this I started studying more... and although I have read both McMillan books and a couple of others - there is nothing as good as these threads! Nothing like following it with real people, and moment to moment. I think it helps you to get a real "feel" for the moves...
Thanks again to all who share here...it is a great help. I am really anxious to get back into it with all the knowledge and technique gleaned from the exchange of ideas here on SI. ( I am waiting until I am re-settled, moving in next couple of months...too much to do.)
Again, Please be kind and don't kill me here. I had thought of just e-mailing this to Mark because I am in fear of the response! I really believe that this data (stocks with highest premium calls) can be useful though - if it is used in the proper way. The trick I guess is to figure that out... ;-)
Maureen |
