All absolutely true (i think) I haven't looked at your maths but take your point......but that's the problem with all covered calls......the point of the thread (at least I think the point) is to compare itm covered calls and otm covered calls, and the scenario is a lot worse with an otm covered call which you advocate?
Characteristics of a good and Low risk Deep ITM covered call
My Quote >> "Your loss is now 100 pts + costs. correct?=£1,000 + costs lets say £50 + a futher 5-15 pts, lets say 10 pts= total £1,150-00 correct? all this risk for a potential gain of £ 80. [novice stuff] Even TEN winning trades minus costs wont save you!"
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FK, Paris,
Can you work out the above? Do you know how i arrive to the 5-15 pts? and do you know what this is for?
By the way the 60 pts prems, should be 54-57 and not 60 on a stock at 500p with a writen ITM 450 strike on a ONE MONTH LIFE span Call Option. The time value would be 4-7 ticks the rest on intrinsic value.
Check it out with ur broker and let me know what he thinks.
Doing OTM Buy-write Call Options far out!! is a LOT better and SAFER than ITM buy-write with just a FEW weeks life on Option. Correct? Do you agree with this logic?
Out -come: You still get to keep the stock EVERY MONTH!! No unnessesary commissions paid! Make sure the writen leg is ALWAYS stays 2-3 mths away to xpiry! Pocket heavy prem's.
Let the stock rise to your advantage and not to the Option buyer. He will never assigne you cause he's position will be kept OTM at all time! with you in control to adjust the Option to ur advantage. Now you are getting stock growth on top you are pocketing [rental] premiums!! Get the picture? Think it through its simple.
Check out my trades at >> www.tacticaltrader.com
Look at the following: Astrazeneca, Footsie [ftse]. Warrants Options bineries. Gold.
Hopefully this will help you guy's, from losing your dosh!
bulldozer
Happy trading and stay hedged always.
===============================================================
FK, Paris,
Can you work out the above? Do you know how i arrive to the 5-15 pts? and do you know what this is for?
By the way the 60 pts prems, should be 54-57 and not 60 on a stock at 500p with a writen ITM 450 strike on a ONE MONTH LIFE span Call Option. The time value would be 4-7 ticks the rest on intrinsic value.
Check it out with ur broker and let me know what he thinks.
Doing OTM Buy-write Call Options far out!! is a LOT better and SAFER than ITM buy-write with just a FEW weeks life on Option. Correct? Do you agree with this logic?
Out -come: You still get to keep the stock EVERY MONTH!! No unnessesary commissions paid! Make sure the writen leg is ALWAYS stays 2-3 mths away to xpiry! Pocket heavy prem's.
Let the stock rise to your advantage and not to the Option buyer. He will never assigne you cause he's position will be kept OTM at all time! with you in control to adjust the Option to ur advantage. Now you are getting stock growth on top you are pocketing [rental] premiums!! Get the picture? Think it through its simple.
Check out my trades at >> www.tacticaltrader.com
Look at the following: Astrazeneca, Footsie [ftse]. Warrants Options bineries. Gold.
Hopefully this will help you guy's, from losing your dosh!
bulldozer
Happy trading and stay hedged always.
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FK,
All that I said was>> Doing OTM is better than doing ITM Buy-writes!!
I Did NOT SAY IT WAS MY PREFERED CHOICE IN OPTIONS!!! IF YOUR CHOICE IS DOING "BUY-WRITE" THEN OTM IS A BETTER CHOICE.
ITS NOT MY STYLE OF TRADING "BUY-WRITE" THE POTENTIAL LOSS ON STOCK DIVING MAKES THE TRADE A NON STARTER FOR ME. I DONT BUY STOCK!
ONLY 10 pts profit on a £5000 investment with a risk on that stock diving, even if stock does not dive, i would not touch it. Because the outlay is too big for a small return of 10-12 pts. As Gordon Geko would say "its a dog with fleeeeez z z zzzz"
Bull
All that I said was>> Doing OTM is better than doing ITM Buy-writes!!
I Did NOT SAY IT WAS MY PREFERED CHOICE IN OPTIONS!!! IF YOUR CHOICE IS DOING "BUY-WRITE" THEN OTM IS A BETTER CHOICE.
ITS NOT MY STYLE OF TRADING "BUY-WRITE" THE POTENTIAL LOSS ON STOCK DIVING MAKES THE TRADE A NON STARTER FOR ME. I DONT BUY STOCK!
ONLY 10 pts profit on a £5000 investment with a risk on that stock diving, even if stock does not dive, i would not touch it. Because the outlay is too big for a small return of 10-12 pts. As Gordon Geko would say "its a dog with fleeeeez z z zzzz"
Bull
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Hi Effkay and Buldozer,
I am late to answer all your posts but the protection is much bigger with a Deep ITM covered call but the returns will be half or a quater of what I can expect with an ATM covered call. It all depend if you want to monitor actively your account for few more % a month or if you have enough capital invested in Deep ITM to be happy with a smaler % and trade only once a month with no additional monitoring.
Yes if the stock drop 40% and my protection from my ITM CC is 30% I do lose money, but tell me if you do not lose money if same stock drop 40% and you have 12% protection from a ATM CC ?
I read only first page of your comment sso excuse me if I missed something, but I will come back and read the rest later today.
I am late to answer all your posts but the protection is much bigger with a Deep ITM covered call but the returns will be half or a quater of what I can expect with an ATM covered call. It all depend if you want to monitor actively your account for few more % a month or if you have enough capital invested in Deep ITM to be happy with a smaler % and trade only once a month with no additional monitoring.
Yes if the stock drop 40% and my protection from my ITM CC is 30% I do lose money, but tell me if you do not lose money if same stock drop 40% and you have 12% protection from a ATM CC ?
I read only first page of your comment sso excuse me if I missed something, but I will come back and read the rest later today.
Profitaker
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Anyone wanting to deliberately buy stock to write Calls against would do as well / better by shorting a naked Put. But, assuming you were hell bent on buy-write, then selling OTM calls would be the only logical choice (otherwise why buy the stock ?).
However, IF you already owned the stock, and IF your view was neutral to slightly bullish, but IF for whatever reason (portfolio unbalanced for example) you wanted a more significant downside hedge then selling ITM Calls would be the way to go.
So, my take, for what it's worth, is that whether you write OTM or ITM covered Calls depends on the individuals a) view on the stock and to a slightly lesser extent b) personal circumstances.
Tin Hat going on !
However, IF you already owned the stock, and IF your view was neutral to slightly bullish, but IF for whatever reason (portfolio unbalanced for example) you wanted a more significant downside hedge then selling ITM Calls would be the way to go.
So, my take, for what it's worth, is that whether you write OTM or ITM covered Calls depends on the individuals a) view on the stock and to a slightly lesser extent b) personal circumstances.
Tin Hat going on !
FK,
I'm not arguing with you!! I'm simply teaching YOU for FREE and helping you to keep your hard earned cash a bit longer.!!
Keep reading your Options books and paper trade until you have found a strategy with BETTER risk/reward, than a £100 [10pts] on a investment of £5,000. your better off putting it on Premium Bonds [u can get the forms from the post office] Check out Channel 4 teletex page 539. You have a better chance of winning a £100K per year there and still keep your money SAFE!
Bull
Having NO position is a POSITION!!
I'm not arguing with you!! I'm simply teaching YOU for FREE and helping you to keep your hard earned cash a bit longer.!!
Keep reading your Options books and paper trade until you have found a strategy with BETTER risk/reward, than a £100 [10pts] on a investment of £5,000. your better off putting it on Premium Bonds [u can get the forms from the post office] Check out Channel 4 teletex page 539. You have a better chance of winning a £100K per year there and still keep your money SAFE!
Bull
Having NO position is a POSITION!!
Profittaker,
your quote>>"However, IF you already owned the stock, and IF your view was neutral to slightly bullish, but IF for whatever reason (portfolio unbalanced for example) you wanted a more significant downside hedge then selling ITM Calls would be the way to go."
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The whole purpose of doing "buy-writes" is to keep the stock and keep the prem's for as long as possible [1-4 yrs or longer] BUT NOT AS A HEDGE.
10pts= £100 RETURN MINUS COSTS = £70-80 at best! on an investment of £5,000.
Would you do it?? If the stock drops 20-30% How long will it take you to recover those loses at that rate of £80.
bull
your quote>>"However, IF you already owned the stock, and IF your view was neutral to slightly bullish, but IF for whatever reason (portfolio unbalanced for example) you wanted a more significant downside hedge then selling ITM Calls would be the way to go."
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The whole purpose of doing "buy-writes" is to keep the stock and keep the prem's for as long as possible [1-4 yrs or longer] BUT NOT AS A HEDGE.
10pts= £100 RETURN MINUS COSTS = £70-80 at best! on an investment of £5,000.
Would you do it?? If the stock drops 20-30% How long will it take you to recover those loses at that rate of £80.
bull
Profitaker
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Bulldozer
Did you read my several "IF" statements ? I wrote them in capitals for you.
Did you read my several "IF" statements ? I wrote them in capitals for you.
Bulldozer....that was a completely made up example to make you understand my point.
As for teaching me....I haven't learnt a thing from this thread yet....I thought you didn't understand the point of ITM covered calls and so was trying to teach you.
As profitaker says there are times when one would use an itm covered call to give a little bit of extra protection, it's as simple as that.
As far as
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The whole purpose of doing "buy-writes" is to keep the stock and keep the prem's for as long as possible [1-4 yrs or longer] BUT NOT AS A HEDGE.
10pts= £100 RETURN MINUS COSTS = £70-80 at best! on an investment of £5,000.
Would you do it?? If the stock drops 20-30% How long will it take you to recover those loses at that rate of £80.
------------------------------------------------------------------------------------------------------------------------------------------------
Yes that is ONE of the reasons to do a covered call, and admittedly probably the main one, but that wasn't the purpose of this thread. A TRUE covered call position wouldn't care about being assigned as it has been taken into account (any options book should tell you that).
As for teaching me....I haven't learnt a thing from this thread yet....I thought you didn't understand the point of ITM covered calls and so was trying to teach you.
As profitaker says there are times when one would use an itm covered call to give a little bit of extra protection, it's as simple as that.
As far as
------------------------------------------------------------------------------------------------------------------------------------------------
The whole purpose of doing "buy-writes" is to keep the stock and keep the prem's for as long as possible [1-4 yrs or longer] BUT NOT AS A HEDGE.
10pts= £100 RETURN MINUS COSTS = £70-80 at best! on an investment of £5,000.
Would you do it?? If the stock drops 20-30% How long will it take you to recover those loses at that rate of £80.
------------------------------------------------------------------------------------------------------------------------------------------------
Yes that is ONE of the reasons to do a covered call, and admittedly probably the main one, but that wasn't the purpose of this thread. A TRUE covered call position wouldn't care about being assigned as it has been taken into account (any options book should tell you that).
FK,
IF what you say is TRUE? "you have not learned a thing about my posts" Well, i'd like to say sorry for waisting your time. There was so much or better things i could have done instead of writing these posts.
As for you teaching me about Options? You did not know thing about options 3 months ago. and you have no clue on the "GREEKS" especialy the "DELTA"
One last comment b4 I stop posting on this thread. If it takes £5,000 to make 70-80 per mth, how much do you think your £1,000 investment will make AFTER deductions [costs] per month??? Simple maths U dont need a calculator.
bulldozer
Happy trading
IF what you say is TRUE? "you have not learned a thing about my posts" Well, i'd like to say sorry for waisting your time. There was so much or better things i could have done instead of writing these posts.
As for you teaching me about Options? You did not know thing about options 3 months ago. and you have no clue on the "GREEKS" especialy the "DELTA"
One last comment b4 I stop posting on this thread. If it takes £5,000 to make 70-80 per mth, how much do you think your £1,000 investment will make AFTER deductions [costs] per month??? Simple maths U dont need a calculator.
bulldozer
Happy trading
Bull,
You wrote: Doing OTM Buy-write Call Options far out!! is a LOT better and SAFER than ITM buy-write with just a FEW weeks life on Option. Correct? Do you agree with this logic?
Out -come: You still get to keep the stock EVERY MONTH!! No unnessesary commissions paid! Make sure the writen leg is ALWAYS stays 2-3 mths away to xpiry! Pocket heavy prem's.
Let the stock rise to your advantage and not to the Option buyer. He will never assigne you cause he's position will be kept OTM at all time! with you in control to adjust the Option to ur advantage. Now you are getting stock growth on top you are pocketing [rental] premiums!! Get the picture?
___________________________
You are funny, when you talk about a deep ITM CC with 30% protection, you ask if we make money when the stock drop 50%; off course not!
Now tell me why just because you write a ATM instead of a ITM the stock should go up instead to drop 50%, I would like to understand. Why you dont make the same assumption that the stock will drop 50%, then tell me how much money you make with a ATM CC?
Also;
What we have not mentionned up to now is that with a Deep ITM CC let say I have a protection of 30%and my stock drop by let say 35% (I am not optimistic and I dont assume it will go up) I still can recover easely by bying back my call and selling a further in the money call with further (next) month expiration. Harder to do if you have a ATM CC with 10% protection. Then next month if it continues to drop you are really badlucky but you can still save the situation again by doing the same thing again. You probably dont make any money but you save one trade.
You wrote: Doing OTM Buy-write Call Options far out!! is a LOT better and SAFER than ITM buy-write with just a FEW weeks life on Option. Correct? Do you agree with this logic?
Out -come: You still get to keep the stock EVERY MONTH!! No unnessesary commissions paid! Make sure the writen leg is ALWAYS stays 2-3 mths away to xpiry! Pocket heavy prem's.
Let the stock rise to your advantage and not to the Option buyer. He will never assigne you cause he's position will be kept OTM at all time! with you in control to adjust the Option to ur advantage. Now you are getting stock growth on top you are pocketing [rental] premiums!! Get the picture?
___________________________
You are funny, when you talk about a deep ITM CC with 30% protection, you ask if we make money when the stock drop 50%; off course not!
Now tell me why just because you write a ATM instead of a ITM the stock should go up instead to drop 50%, I would like to understand. Why you dont make the same assumption that the stock will drop 50%, then tell me how much money you make with a ATM CC?
Also;
What we have not mentionned up to now is that with a Deep ITM CC let say I have a protection of 30%and my stock drop by let say 35% (I am not optimistic and I dont assume it will go up) I still can recover easely by bying back my call and selling a further in the money call with further (next) month expiration. Harder to do if you have a ATM CC with 10% protection. Then next month if it continues to drop you are really badlucky but you can still save the situation again by doing the same thing again. You probably dont make any money but you save one trade.
Profitaker
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A trader can change his view on a stock, Option prices are constantly changing, Greeks and IV are fluid, as you know. A trader may have also taken load elsewhere in his options portfolio. The reasons WHY a trader would write ITM Calls against held stock is almost endless. But there are circumstances when it is appropriate, and not necessarily out of stupidity, as some here seem to be at pains to imply.
An open mind, and willingness to maneuver are essential when trading options IMHO.
An open mind, and willingness to maneuver are essential when trading options IMHO.
ParisD I agree with you completely. Bulldozer...I really don't know what you;ve been trying to prove here. As I said the example I gave was just that AN EXAMPLE.....completely made up and untradable. Therefore I would look for real opportunities that gave a better return.
As for my knowledge about delta...I don't think I've mentioned that word once in this thread.
As for my knowledge about delta...I don't think I've mentioned that word once in this thread.
Paris,
Read all my posts in the right order. You will find that i dont do CC at all!! [ITM or ATM or OTM ]
You go on about "PROTECTION" on stock by writing CALLS ITM.
If i were to buy a stock? I would buy it because i want it to go UP in VALUE and if i decide to write against the stock i would write OTM not ITM, this way i profit from the rise on the stock and the income from the OTM Calls and save a LARGE packet in commissions and i dont need to keep buying BACK the stock after each assignement.
OK, Here is another good question for you: Assuming you do the trade that you like best [ITM ]and the stock is called away! Whats your profit after all xpances are paid.
If i traded my style with a stock that i believe will rise[bullish] and done OTM CC over a period of 1yr. I will beat you hands down and with a LOT LESS costs and i would not need to pay more xpances [costs] in buying the stock every month.
Bull
Read all my posts in the right order. You will find that i dont do CC at all!! [ITM or ATM or OTM ]
You go on about "PROTECTION" on stock by writing CALLS ITM.
If i were to buy a stock? I would buy it because i want it to go UP in VALUE and if i decide to write against the stock i would write OTM not ITM, this way i profit from the rise on the stock and the income from the OTM Calls and save a LARGE packet in commissions and i dont need to keep buying BACK the stock after each assignement.
OK, Here is another good question for you: Assuming you do the trade that you like best [ITM ]and the stock is called away! Whats your profit after all xpances are paid.
If i traded my style with a stock that i believe will rise[bullish] and done OTM CC over a period of 1yr. I will beat you hands down and with a LOT LESS costs and i would not need to pay more xpances [costs] in buying the stock every month.
Bull
"I agree with Bull on the following point, if someone has only 1000£ he should not trade ITM or ATM CC as he will pay only commissions to his broker!"
Who mentionned he was trading with 1000£ ?
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Paris,
Is there any thing else you agree with my posts??????????
FK,
Please let me know what ur profits are in 6 mths on ur capital outlay [Percentage terms only. I dont need to know ur capital amount.]
Bull
Happy trading guy's
Who mentionned he was trading with 1000£ ?
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Paris,
Is there any thing else you agree with my posts??????????
FK,
Please let me know what ur profits are in 6 mths on ur capital outlay [Percentage terms only. I dont need to know ur capital amount.]
Bull
Happy trading guy's
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