Are there advantages to selling calls at several strike prices?

[MathTeacher]

I am considering selling covered calls on my XOM.
I have 500 shares and am looking at April 21 expiration.
Does it make any sense to sell one contract at 100, one at 105, one at 110, one at 115 and one at 120?
I am very new to options.

 

[smallfil]

I am considering selling covered calls on my XOM.
I have 500 shares and am looking at April 21 expiration.
Does it make any sense to sell one contract at 100, one at 105, one at 110, one at 115 and one at 120?
I am very new to options.

One advantage for selling calls at various strike prices is the likelihood, some calls you sold will wind up out of the money and you end up keeping 100% of the premium. Those calls you sell that end up being in the money even by $0.01, will be exercised by your broker and your shares taken at the strike price of the option and given to the option buyer. Time is your ally when you are selling options and out of the money options have cheaper premiums but, have a higher chance that you will end up keeping both the premium and your shares to re-sell again with another call option.

 

[Scataphagos]

I am considering selling covered calls on my XOM.
I have 500 shares and am looking at April 21 expiration.
Does it make any sense to sell one contract at 100, one at 105, one at 110, one at 115 and one at 120?
I am very new to options.

No real advantage... just a guess. Yours is reasonable for its likely small money potential...

 

[MathTeacher]

One advantage for selling calls at various strike prices is the likelihood, some calls you sold will wind up out of the money and you end up keeping 100% of the premium. Those calls you sell that end up being in the money even by $0.01, will be exercised by your broker and your shares taken at the strike price of the option and given to the option buyer. Time is your ally when you are selling options and out of the money options have cheaper premiums but, have a higher chance that you will end up keeping both the premium and your shares to re-sell again with another call option.

Thanks, that is my take as well. It just seems a little better (less risk) than putting all of my "eggs" in one strike price.

 

[Roark]

XOM closed at 115.61. It makes no sense to sell calls at 100, one at 105, and at 110 because they're already in the money. Selling a call at 120 makes sense if you think it's unlikely that xom will reach that price before expiration of the option and you're happy to take $120 per share for part of your position.

Suggested strategy: Take a half-position in XOM. On a down day sell an out of the money put. On an up day, sell an out of the money call for the same expiration. You will win an on either the put or the call and possibly both if the stock goes sideways and closes out of the money for both options.

 

[MathTeacher]

Thanks, Selling an in the money call has sense if you think that XOM will possibly go down under 105 by April 21. April 21 is a decent amount of time away. Right?
Thanks on the suggested strategy. It is executing by choosing smart days to sell the put (down day) and a smart day to sell the call (up day)

 

[MathTeacher]

One advantage for selling calls at various strike prices is the likelihood, some calls you sold will wind up out of the money and you end up keeping 100% of the premium. Those calls you sell that end up being in the money even by $0.01, will be exercised by your broker and your shares taken at the strike price of the option and given to the option buyer. Time is your ally when you are selling options and out of the money options have cheaper premiums but, have a higher chance that you will end up keeping both the premium and your shares to re-sell again with another call option.

PS if my sold calls are a little in the money, I tend to roll them to the next expiration date, at the same strike price, make a little more money and see if the closing price the next week drops under.

 

[Scataphagos]

I am considering selling covered calls on my XOM.
I have 500 shares and am looking at April 21 expiration.
Does it make any sense to sell one contract at 100, one at 105, one at 110, one at 115 and one at 120?
I am very new to options.

No matter how you slice it... there isn't much you can to do significantly enhance your returns beyond "capturing the premium from the covered call write". Might as well just KISS, baby!

 

[MathTeacher]

Based on the calculations, you are right. It is 6 of one, half a dozen of the other.
If I skew more towards OTM and the stock goes higher then, duh, I do better.
If I skew more towards ITM and the stock goes lower then, duh, I do better.
XOM is so volatile, I'm considering just holding my shares and buying some puts for insurance.

 

[taowave]

Keeping it simple, choose the strike that will set up your minimum I acceptable rate of return on the short call,or how much downside protection the short call provided..

Remember, different strikes offer varying risk reward metrics,and its up to you to decide which one meets your criteria...

There are more advanced methods,but the above should be fine

I am considering selling covered calls on my XOM.
I have 500 shares and am looking at April 21 expiration.
Does it make any sense to sell one contract at 100, one at 105, one at 110, one at 115 and one at 120?
I am very new to options.