Anyone know a good covered call service

Quote from exQQQQseme:

Michael, the answer is Yes...I consider carrying cost in that when I calculate my return on investment on my covered calls I "annualize" the profit percentage....
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I didn't ask you if you considered carrying cost. Carrying cost is the reason for price disparities in same strike options. Implied volatilty has nothing to do with relative prices of options at the same strike. I'll say this again. If the difference between same strike options is more or less than the carrying cost then a risk free arb exists.

Perhaps you should be asking a different question, like what really is put/call parity. As others have mentioned you don't seem to understand it at all. Maybe you should state your understanding of put/call parity. This way we can all get on the same page.
 
Michael, sorry it was Nikko who asked whether I consider carrying costs.

Regarding Parity...here is an actual quote within the last 20 minutes:

Underlying: AGIX - Current Price: $10.33

$10C: Bid $1.10; Extrinsic Value of Bid: $ .77; IV of Bid: 115.61

$10P: Bid $1.05; Extrinsic Value of Bid: $1.05; IV of Bid: 153.96

This appears to me and my lack of Put/Call Parity knowledge, that in this case, the sale of the Put would be preferable to the sale of the call as part of a covered put write.

And I sincerely appreciate the excellent answer you gave above regarding the logic of the necessity of parity.
 
Quote from exQQQQseme:

Michael, sorry it was Nikko who asked whether I consider carrying costs.

Regarding Parity...here is an actual quote within the last 20 minutes:

Underlying: AGIX - Current Price: $10.33

$10C: Bid $1.10; Extrinsic Value of Bid: $ .77; IV of Bid: 115.61

$10P: Bid $1.05; Extrinsic Value of Bid: $1.05; IV of Bid: 153.96

This appears to me and my lack of Put/Call Parity knowledge, that in this case, the sale of the Put would be preferable to the sale of the call as part of a covered put write.

And I sincerely appreciate the excellent answer you gave above regarding the logic of the necessity of parity.
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If you think these quotes are valid why didn't you sell that put, bought the call and hedge with short stock? Could'v locked in 30 cts without any risk!

Ursa..
 
Quote from exQQQQseme:

Michael, sorry it was Nikko who asked whether I consider carrying costs.

Regarding Parity...here is an actual quote within the last 20 minutes:

Underlying: AGIX - Current Price: $10.33

$10C: Bid $1.10; Extrinsic Value of Bid: $ .77; IV of Bid: 115.61

$10P: Bid $1.05; Extrinsic Value of Bid: $1.05; IV of Bid: 153.96

This appears to me and my lack of Put/Call Parity knowledge, that in this case, the sale of the Put would be preferable to the sale of the call as part of a covered put write.

And I sincerely appreciate the excellent answer you gave above regarding the logic of the necessity of parity.
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I can't answer your question because I can't validate the exact moment your pricing was taken from. I took quotes of AGIX at 15:50.00. Here are the prices

AGIX = Bid 10.23, Ask 10.24
March 10 Call = Bid 1.10, Ask 1.35
March 10 Put = Bid 1.05, Ask 1.10

Assuming nickel pricing if I sold the call @ 1.20 (stepping in the spread) and bought the put @ 1.10 and the stock @ 10.24 (synthetic long call) I would have done a conversion with a flat risk profile.

The call and put transactions leave me with .10 credit. That credit represents the cost of me holding the long AGIX stock until expiration. In fact, the spread will leave you negative. Paying the spread will only yield roughly 3.5 percent annualized to offset the carry on the stock.

Again, usually when the calls and puts differ in price by more than carry there is an arb. When it does happen it's normally due to a corporate action event.
 
Quote from exQQQQseme:

[ I have a full time accounting practice I am comfortable with this strategy because I don't need to concern myself with assignment. ]

You don't have to concern yourself with assignment because you took "voluntary assignment" when you bought the stock.

[I'm all about Implied Volatility and Fundamental Analysis of the underlying stock. My fundamental analysis always starts with the Balance Sheet, particularly the current assets to current liabilities. If I don't like what I see there, I have no interest in going any further and I look to another issuer for a possible trade.]

Good ideas. If you did this with stocks that have a high risk of bankrupcy, you could easily lose on these.
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Hi Ursa...great hearing from you again. I hope all is going well. I am very appreciative that both you and Michael took the time to analyze the numbers I put up. Actually, consistent with what Michael said, the end of the session bids did come closer and now are only 9 cents apart.

Donahuedc, you and I are in complete agreement regarding the need to be alert to the need to stay away from companies which are in danger of going belly up. Hence, as soon as I see a low priced stock with a high IV spike, first thing I do is click to Yahoo Finance and check out the Balance Sheet.

I want to thank all of those who responded here to my postings. I hope others besides me have benefited from this exchange. By the way, I have a similar open position involving AGIX. The IV is off the charts and I'm pleased with my open position. I opened the trade last Monday. It is a covered call write on an April call. Notwithstanding all of the valid comments regarding the synthetic equivalency, Schwab, as well as every other broker I know of, won't allow their customers to write uncovered options in an IRA.

Thanks again, and have a great weekend.

4Q
 
Quote from exQQQQseme:

Hi Ursa...great hearing from you again. I hope all is going well. I am very appreciative that both you and Michael took the time to analyze the numbers I put up. Actually, consistent with what Michael said, the end of the session bids did come closer and now are only 9 cents apart.
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Hi 4Q, fine here, glad to hear from you again, tax season is over? :)

I'm surprised that the anomaly you described existed at all, this very seldom. It is very easy to build a scanner to find these opportunities. And since they are entirely riskless they will be done in massive numbers, meaning the overpriced options will be sold en masse and the cheap options will be bought. Within a few seconds the prices will have become fair again.

It could be that in todays very volatile markets some quoting problems exist, but I'm (almost) certain that the real prices, the ones you would pay or get are completely in line with the expected p/c parity.

I acknowledge your reasons for doing CC's instead of naked calls, as long as you don't deny their equivalence. There is no reason for calls to be better priced than puts, nor is there the possibility for that to exist for longer than a few seconds. In fact, with so many CC-ers around I would even think that calls' premiums are the ones under pressure.

Ursa..
 
Ursa, actually tax season is at its high point. In the US, individual tax returns are due April 15 and corporate returns are due March 15. Even though extensions are available, generally for a period of 6 months, there are a lot of calculations necessary, even where an extension is contemplated.

Back to the subject at hand, even if I were able to find the unusual anomaly which I stumbled across this afternoon, I would not be in a position to take advantage of it. Reason is that I have not received broker approval for uncovered option writing.

When I have time to devote to options trading, I scan for At the Money Calls with IV significantly higher than normal. My thinking is that when the skew is going through the roof, if people are hell bent on overpaying for options I need to find a way to accommodate them.

In any event this is a great break from the grind of preparing tax returns, and also a lot of fun interacting with you all.

4Q
 
IV Trader, thanks for the caution. I don't have a big position here. I was attracted to this, as you can appreciate, by the fact that the March and April calls have an IV in excess of 300. Obviously, with numbers like that this is an explosive situation. Some more specifics regarding my present position:

I do have just 2 covered call contracts, with the written calls being April. Net debit, what I consider to be a safe $6.91. Yes, the Balance Sheet shows net negative stockholders equity; however, much of this is attributable to t$300 million convertible long-term debt. $100 million matures September 2008 and $200 million in September 2012. Presently their current assets exceed current liabilities by about $150,000. So, I don't see any bankruptcy concerns prior to September 2008, if then. I don't intend to be in this much more than 3 or 4 months, if that long.

The problem with what I just said in the paragraph immediately above is that the Balance Sheet figures are December 31, 2005 numbers. The 10K for December 31, 2006 should be filed with the SEC within the next two weeks.

My $6.91 opening entry is now about $6.35 (net of commission estimates), so I'm down about $110. I'm cool with that, at least until I see the new 10K numbers.

Again, thanks so much for your posting and warning.

Bob
 
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