Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: randpaul who wrote (1874)	5/29/2017 9:58:30 PM
From: alanrs	Respond to of 2591

Welcome to SI, pretty good first post and not a bad plan. There are so many possibilities but a "buy/write" (what you are proposing to do) is a fine way to get ones feet wet. This is a fairly inactive board but there also aren't so many posts that a review of some of the earlier ones might not be too hard. Or....which large cap did you have in mind, and what strike price and expiration where you considering? At a minimum I could go through how I would think about it, maybe others would chime in too. ARS

To: randpaul who wrote (1874)	5/31/2017 12:03:42 PM
From: TheNoBoB	3 Recommendations Recommended By richardred Thehammer Truedarkblue Respond to of 2591

Re: Covered calls My plan would include buying only blue chip low volatility dividend stocks. Please instruct me whether this makes any sense. Lots of folks sell calls against their core portfolio holdings. Keep in mind the low-volatility characteristic you seek results in correspondingly low option premium, as implied volatility is a major component of option pricing. You'll have to evaluate if the premiums received in today's historically low volatility environment compensate you enough for the risk of losing your shares. Also, note that you don't have to hold the call until expiration, and you can always roll the option out in time (and sometimes, out and up if the premium works in your favor) if you don't want the shares called away, rather than accept assignment and lose the shares (which is often a higher cost transaction). If you decide to dive into the options world, be sure to read up on pitfalls like dividend risk to avoid unpleasant surprises. Good luck and good trading.

To: randpaul who wrote (1874)	6/19/2017 11:06:09 PM
From: Bridge Player	Read Replies (1) \| Respond to of 2591

I like the plan and there are some stocks that are cheap enough that might fit the bill. TEVA for example. You would need to consider what happens to your "income stream" when the calls you sell move into the money. Writing short puts if your account permits is a possible strategy to attempt to replace called-away stock. I suspect you already own the stocks that you plan to never sell. You might also need to consider what happens to your "income stream" when the calls you sell move into the money, particularly if the underlying stock continues to move higher. Basically, the plan's success will depend on stock choice and both stock and market volatility.