Are there advantages to selling calls at several strike prices?

[MathTeacher]

If you did not FULLY understand what you just did, you may not have made the correct trade. Not saying you didn't. But not fully understanding, could create problems in the future. Hand holding buy your broker (if they allow it) may be needed at this time...

PS I thought that what I just did was to take out an "insurance policy" on my 500 shares of XOM

 

[Cabin111]

PS I thought that what I just did was to take out an "insurance policy" on my 500 shares of XOM

You did...I'm just trying to get you to think outside the box a bit.

Come Wednesday to Friday are there any cases where you would want to close/unwind your position?? I don't have the answers. Just letting you chew on it...

I'm out of this thread...

See you somewhere else...

 

[MathTeacher]

You're long a synthetic 110C. Don't listen to people that don't understand proper nomenclature. Using synthetics is best practice.

There are traders out there that will short the inside strangle (110C, 120P) over the outside (110P, 120C) because they believe the added credit is an edge. The difference between the two is the box arbitrage. They are equivalent. The importance of which is that their credits should only differ by the strike-diff (and credit impact in rates).

Same with people recommending put and call calendars at a strike as they are "covering both sides" when in fact they are simply doubling size.

Do you own the yacht?

 

[MathTeacher]

You did...I'm just trying to get you to think outside the box a bit.

Come Wednesday to Friday are there any cases where you would want to close/unwind your position?? I don't have the answers. Just letting you chew on it...

I'm out of this thread...

See you somewhere else...

I've owned XOM for 20 years. So don't want too much tax liability all at once.
Thanks for making me think.
PS I really am a math teacher.

 

[destriero]

Do you own the yacht?

lol has nothing to do with the bourgeois boat. I used to collect/trade high-end watches. My first big flip was an IWC il Destriero Scafusia that I bought in HK and sold a year later to a Saudi royal.

 

[smallfil]

Let me start off by saying that I have always been a "buy and hold" investor.
So I started selling (writing) covered calls because I was trying to create some income rather than just watch.

One more thing about selling call options. When you sell a call, you cap any upside to your stock to the strike price. If your stock runs up 20 or 30 points above your call option, those profits wind up with the call option buyer. Also, while time is an ally of the option seller like when you write a covered call, the longer the expiration say 3 months or 6 months or 1 year out (LEAPs) option, the advantage switches to the call option buyer as he has more time to be right and make monies. All these things need to be considered if you are considering taking any option position, be it as a seller or buyer of the option.

 

[MathTeacher]

lol has nothing to do with the bourgeois boat. I used to collect/trade high-end watches. My first big flip was an IWC il Destriero Scafusia that I bought in HK and sold a year later to a Saudi royal.

You like to buy and sell...
Sounds like you have been around.

 

[MathTeacher]

One more thing about selling call options. When you sell a call, you cap any upside to your stock to the strike price. If your stock runs up 20 or 30 points above your call option, those profits wind up with the call option buyer. Also, while time is an ally of the option seller like when you write a covered call, the longer the expiration say 3 months or 6 months or 1 year out (LEAPs) option, the advantage switches to the call option buyer as he has more time to be right and make monies. All these things need to be considered if you are considering taking any option position, be it as a seller or buyer of the option.

Thanks. I know about the cap on the upside. Had my SCCO assigned as gold/copper/iron ore went nuts in January. I like to sell covered calls. So far, I have done very well. Making money whereas before I would just be sitting and watching my portfolio go up and down.

 

[TheDawn]

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.

Straddles is a directionless play that you buy it when you are not sure which direction the underlying is going or not interested in trading in any particular direction for the underlying but you know the underlying is going to move a lot either up or down i.e. with high volatility. Buying a straddle involves buying a call + selling a call so you make money when the underlying makes a huge move in either direction. Selling straddles is the opposite, you expect the underlying not to move at all in either direction so you sell a put+ sell a call, earning premiums from selling both ways. If the stock ever moves either way beyond the strike of either the call or the put more than the premium price then you suffer losses.

If you have an idea of where the underlying is going, then straddle is not what you want or need to do like in your case you believe the stock is going up, it's best to invest or trade the underlying and then either buy a put to protect against any downside (what people call insurance and what I call the wingman for the stock). Or if you believe the stock is going down, you can short the stock and then buy a call in case if you get short-squeezed. Shorting a call for a bit of income while you hold the stock is fine but you just need to keep in mind that it will have very limited protection to the downside (only up to the premium that you sold the call for) if the stock starts to go down but at the same time caps the gain potential of the stock up to the strike of the call because once the stock price reaches or goes above the strike on the call that you sold, your call can be exercised against you and your shares would be sold. So it's not that good of an idea to sell a call on a stock that's very volatile i.e. moves a lot because when the stock goes up a lot, you lose all of the money that you could've made above the strike price on the call but when the stock goes down a lot, the premium that you sold the call for won't be enough to compensate for the loss that you might incur on the underlying.

 

[destriero]

There is so much wrong with this that I don’t know where to begin.

Straddles need not be initially delta neutral, directionless. An example is a directional bet in skew (SDSV) which is a crowded trade.

Buying a straddle is a combo; long call, long put. It does not involve “buying a call and selling a call.”

MsDawn’s pony kicked her in the head, #infinitegamma