I like the idea of selling CC at April expiration as well. Maybe all 5 contracts at the same strike price? In the basic theory, I thought OTM if I think XOM will go up, ITM if I think XOM will go down and ATM if I'm neutral. I don't understand vol, vol-sensitivity, gamma risk. I will study more so that I can understand your help and opinion.
Are there advantages to selling calls at several strike prices?
- Thread starter MathTeacher
- Start date
When I was trying to explain all of the "options" to my wife one night she said, "Can't we just own stock?"
Kind of resonates in my head sometimes.
Kind of resonates in my head sometimes.
What I am trying to get across is that shorting after earnings will result in on of the following scenarios:
1) XOM rallies -> volatility drops
2) XOM falls -> vol holds -> lost opportunity on deltas
If XOM drops you have a lost opportunity to short the calls prior to the report to reduce losses to spot. If XOM rallies you will see a 27-28 vol-line (vol at strike) on XOM. Compounded by the fact that you're intent is to short Feb after earnings.
I don't see XOM moving more than $10 on the earnings response. I would short 10 of the Apr 125C here.
Waiting for a rally to sell a 27 figure on vol will result in a 1.2 premium on the 25C for Feb with shares at 122.
Short the Apr 125 straddle here results in a 13.75 credit here (125P/C or long XOM x short 2x125C). The Apr 125 straddle will likely trade at an $11 figure on a 125 touch, after the report.
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Forget the greeks for now..
Carr before the horse
Where would you happily sell your XOM position.
Whatever price tou cone up with,look at that call strike..
Then calculate what percent of the stock price are you taking in by selli g the call..
if the volatility is low,you may very well say the premium collected is not worth giving up the upside,and/or the premium collected doesnt offer sufficient downside protection...
Show us exactly what you are thinking
Carr before the horse
Where would you happily sell your XOM position.
Whatever price tou cone up with,look at that call strike..
Then calculate what percent of the stock price are you taking in by selli g the call..
if the volatility is low,you may very well say the premium collected is not worth giving up the upside,and/or the premium collected doesnt offer sufficient downside protection...
Show us exactly what you are thinking
I will look into short synthetic straddles.
All I know is selling covered calls. All I know is that selling covered calls when the stock is at a high seems like the best thing to do. I get a much bigger premium at a higher strike price, and the stock is likely to retreat and will not reach the strike price (so I will keep my shares and be able to do it again next week or month)
All I want to do is sell against my existing share position.
I need to learn more about volatility.
I thought I understood a straddle.
All I know is selling covered calls. All I know is that selling covered calls when the stock is at a high seems like the best thing to do. I get a much bigger premium at a higher strike price, and the stock is likely to retreat and will not reach the strike price (so I will keep my shares and be able to do it again next week or month)
All I want to do is sell against my existing share position.
I need to learn more about volatility.
I thought I understood a straddle.
Thank you taowave.
I want to keep it simple.
I want to keep my shares of XOM.
I don't want to just sit and watch (buy and hold) XOM.
I want to generate income.
I want to minimize risk.
Maybe that can't all fit together.
I'm bullish into earnings.
I think earnings will drive the stock price up.
I want to sell covered calls for my 500 shares at a high price on Tuesday.
I think Powell will say/do something stupid or raise 50 basis points... whatever on Wednesday.
In general XOM is at an all time high.
I think it will go down sometime between now and April 21st.
The market will retreat from the January rally and XOM will go down.
Volatility will go down after the report, so the premiums will be lower even if the stock price rallies 5-10 dollars?
Go thru the simple math of selling a call against your shares..
I'm not at a screen,but I doubt you will be thrilled with the premium collected.
Take the price of the call and divide it onto the stock price..That your percent income collected..Its also your "downside" protection..
And aw you know,you are giving up all upside,So make it worth your while
I'm not at a screen,but I doubt you will be thrilled with the premium collected.
Take the price of the call and divide it onto the stock price..That your percent income collected..Its also your "downside" protection..
And aw you know,you are giving up all upside,So make it worth your while