You have to reckon with the reality that people love to sell options because of the high accuracy. That is true, however, the returns are meager. You are risking a lot to hold onto shares if say, it tanks and falls by a huge amount. Any small amount you collect, selling covered calls will be wiped out by the huge drop in share price. Compared to a married put strategy which I deem superior in a strongly, trending stock because as long as the stock runs up, you guarantee a fixed amount to exit, the strike price of the put. No matter what, you are able to sell at that price. If it runs up, your put loses value but, you have gained a lot more profit. Now, you are giving a chunk of your profits in exchange for the peace of mind other traders will never have.
Are there advantages to selling calls at several strike prices?
- Thread starter MathTeacher
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You have to reckon with the reality that people love to sell options because of the high accuracy. That is true, however, the returns are meager. You are risking a lot to hold onto shares if say, it tanks and falls by a huge amount. Any small amount you collect, selling covered calls will be wiped out by the huge drop in share price. Compared to a married put strategy which I deem superior in a strongly, trending stock because as long as the stock runs up, you guarantee a fixed amount to exit, the strike price of the put. No matter what, you are able to sell at that price. If it runs up, your put loses value but, you have gained a lot more profit. Now, you are giving a chunk of your profits in exchange for the peace of mind other traders will never have.
"married put stategy" means I hold my shares and buy puts underneath the current price?
118 is higher than XOM has ever been. The idea is it might go below 105 by April.
XOM has been below 105 a lot more than it has been above. Good times bad times.
Yes, I understand that I am basically selling my XOM at 118.
XOM has been below 105 a lot more than it has been above. Good times bad times.
Yes, I understand that I am basically selling my XOM at 118.
I've written covered calls for about 25 years. Other people are much smarter than me on these threads. Until you fully understand what you are doing, you would be wise to just stick with the covered calls and puts, to buy back near ITM.
Read and learn...Very slowly and with small amounts...You don't want to blow up an account!!
And yes, I have done options (at different prices and the same expiration date), for XOM...It does work. If I were you, I would go from (example $130. in $5.s down to $110.). My wife is always harping on me about losing (getting quality called away) options. I will then need to buy the stock back after 31 days (if I wish...Per IRS rules).
Just last week I owned 200 share of Schwab (SCHW). I had one covered call at $90. Jan 23 and the other was at $72. Jan 23. One got called away, while I am holding the other one. I'll just wait on the one that didn't get called away...See where it leads.
One last thought...XOM at $120. for Mar, Apr, Jun, July, and Jan 24. Do 5 different dates...Continue to collect option money and dividends...
Read and learn...Very slowly and with small amounts...You don't want to blow up an account!!
And yes, I have done options (at different prices and the same expiration date), for XOM...It does work. If I were you, I would go from (example $130. in $5.s down to $110.). My wife is always harping on me about losing (getting quality called away) options. I will then need to buy the stock back after 31 days (if I wish...Per IRS rules).
Just last week I owned 200 share of Schwab (SCHW). I had one covered call at $90. Jan 23 and the other was at $72. Jan 23. One got called away, while I am holding the other one. I'll just wait on the one that didn't get called away...See where it leads.
One last thought...XOM at $120. for Mar, Apr, Jun, July, and Jan 24. Do 5 different dates...Continue to collect option money and dividends...
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Yes. That is how it works. The put option will protect your shares. Was looking at the March 17 2023 $115 put option and the premium last closed at $442. That would cost you $2210 to protect your $27500 profits until March 17 2023. That protection will also, guarantee you are able to sell your 500 shares at $115, come hell or high water until March 17 2023 when the put options expire. Putin's order to cut Russian oil production by 8% is set to start in February 2023. That is bullish for oil prices going forward. Note: if you sold call options on your shares, that has to be dealt with first as if your shares get called out, you might end up with less shares to keep and protect.
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Thank you Cabin111,
I've been selling covered calls for about 25 weeks.
Your analysis matches my thinking, ability and attitude exactly.
Even our wives chime in similarly.
I decided to buy 5 PUT contracts on XOM to protect my shares, while I wait for Earnings/Fed/OPEC etc.
Thank you for your help and suggestions.
I may very well try the staggered expiration date strategy!
Thank you smallfil,
I bought 5 PUTS.
Spending more money and getting "long term protection" is a solid idea.
I'll let you know how it goes.
I have not sold any call options yet,
That 115 put is a bit more expensive today, hopefully it will be cheaper tomorrow after earnings.
Thank you, I feel very ignorant when it comes to your level of options knowledge.
Let me break it down into my language/understanding to see if I've got this.
So, when you say "synthetic" you mean it is just like owning a 110 call. Mixing owning 100 shares with buying a put contract at a strike price (say 110) is just like owning a 110 call?
PS I bought 5 put contracts at a 111 strike price.
I own 500 shares,
So that is "equivalent" to owning 5 111C ?
I own 500 shares,
So that is "equivalent" to owning 5 111C ?