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With the market at all time highs is it now time to sell some options on your stocks? I raised about a grand yesterday selling some options for June. One I sold was DDD at 55 strike for 2 bucks when it ran up 7 percent yesterday.
I think the market is slowing down for the summer, as it usually does, but not quite time yet. I have been "selling" options on a spreadsheet for the last 2 months, not actually doing so, and so far every option would have hit the exercise price and been called. I'm not unhappy that it's gone up about 57% since Oct of last year either, that's the great thing about options...you can win either way.
I am new to this, but here is a scenario I ran, I by BUD at 97.94 100 shares, I then turn around and sell a call option for June for 2.60. If the option is called in I make 100.54 minus my original buy in of 97.94 for a 2.6 profit or 260 dollars. If the price falls and I it does not get called in, I have bought in to BUD for 95.34 which I would be happy to buy in at that. Is this a win win?
I am new to this, but here is a scenario I ran, I by BUD at 97.94 100 shares, I then turn around and sell a call option for June for 2.60. If the option is called in I make 100.54 minus my original buy in of 97.94 for a 2.6 profit or 260 dollars. If the price falls and I it does not get called in, I have bought in to BUD for 95.34 which I would be happy to buy in at that. Is this a winwin?
I am new to this, but here is a scenario I ran, I by BUD at 97.94 100 shares, I then turn around and sell a call option for June for 2.60. If the option is called in I make 100.54 minus my original buy in of 97.94 for a 2.6 profit or 260 dollars. If the price falls and I it does not get called in, I have bought in to BUD for 95.34 which I would be happy to buy in at that. Is this a win win?
But have you considered what will happen if BUD drops to $60?
Will you be OK if BUD jumps to $110 in the next week and your upside is limited?
VIX is close to 5 year lows. Don't see how writing options makes a lot of sense at the moment.
Volatility is only one variable in the options formula, and there are varying objectives among investors.
I am mostly an income-oriented investor. In any case, I missed most of the rally because I did not have funds available. When they became available, I started writing covered puts on dividend-paying stocks. Even though volatility may be relatively low, the options yield is higher than the dividend yield, so I've generated around 6% yield with relatively very little risk on otherwise idle cash, providing downside insurance to current stock holders.
Now, then, if there is a correction, I could get assigned on stocks but which I would be happy to own at the strike price, generating dividend yield, plus later yield on covered calls when the time is right. So a win-win-win-win, unless, from my perspective, the stock market is wildly volatile in one direction, say more than 10% in a month.
To be sure, I missed out on a lot of capital gains, but the options market has helped me hedge, so to speak, my lately available cash, offsetting some of the lost opportunity.
Anyway, that's why it's a market, a place where varying wants and needs meet to be satisfied to one degree or another over time. It usually works. No complaints here.
But have you considered what will happen if BUD drops to $60?
Will you be OK if BUD jumps to $110 in the next week and your upside is limited?
I took that into account. I was going to buy BUD at 95, pays a good div. and its a very stable company, also going into the summer where beer will flow. So if it goes to 60 I am in at 95 where I was going to buy, if it goes to 110 well then I made a couple hundred bucks instead of sitting on the side lines.
I took that into account. I was going to buy BUD at 95, pays a good div. and its a very stable company, also going into the summer where beer will flow. So if it goes to 60 I am in at 95 where I was going to buy, if it goes to 110 well then I made a couple hundred bucks instead of sitting on the side lines.
Most option trading posts include "only the good things" but exclude the considerable risks that exist in the strategy.
On one of the boards I moderated years ago, we had a guy taunting a similar covered call strategy where he was claiming outstanding returns. We asked him to start POSTING his trades 24 hours AFTER he placed them and that we would see how he did.
The results? He did well on the first two positions. Then, he lost significant money on six of the next seven trades.
I am not opposed in principle to some options strategy but you had better understand ALL the risks involved ... and most don't.
With the market at all time highs is it now time to sell some options on your stocks? I raised about a grand yesterday selling some options for June. One I sold was DDD at 55 strike for 2 bucks when it ran up 7 percent yesterday.
Can't help you because I don't know if we are in the beginnings of a long term bull market or if a minor/major pullback is upcoming.
My crystal ball isn't clear enough and anyone who tells you otherwise is either lying or misinformed...
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