As an advanced beginner, here is a basic question. Assuming the underlying is a good stock that you want to own, and you want to make some extra money on it, with covered calls, what is the best expiration date? My guess is selling weeklies. You get the most premium, however there are people who sell monthly, or even quarterly options, and they must have their reasons.
best length for selling a weekly option?
- Thread starter shMark
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Robert Morse
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OK. You done your research. This is your best pick. Why limit you upside for a small amount of Premium? Why not look to have winners to offset the times your picks do not work out?
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My idea is to sell deep OTM calls, that seldom get assigned. If they get close to the strike price, I will buy the call back. The idea is to get the appreciation of the underlying plus maybe an extra 1.5%.
Learn to read Greek.
https://en.wikipedia.org/wiki/Greeks_(finance)
There is no one size fits all. It's gonna depend on the stock and what's going on... both with the stock, and with the market in general
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Do you use greeks like Charm, Veta, Vana, etc.? I only know things like theta, delta, gamma, vega, and roh.Learn to read Greek.
https://en.wikipedia.org/wiki/Greeks_(finance)
There is no one size fits all. It's gonna depend on the stock and what's going on... both with the stock, and with the market in general
Maybe you can sell 2 calls of delta 30 (Month) against 100 stock. Roll them to the next month when they become 100 delta together.
You need some programming (iterating using for-loops etc).
Here's the generic algorithm in pseudo-code (of course the indendation is important
) .The algorithm is for single-leg vertical strategies (incl. CoveredCall (CC) when seen/treated as single-leg, and CashSecuredPut (CSP) etc.).
Also some other strategies can be seen/treated as single-leg (just use some creativity...
).For (advanced) multi-leg strategies some more loops are required (but it then of course gets much more complicated).
Code:
ALGORITHM FOR FINDING THE BEST TRADE CANDIDATES:
Step-01: Clear the ResultTable (can also be an array, vector or multiset etc.)
Step-02: For all Strategies
Step-03: For all Tickers
Step-04: For all ExpDates (of this Ticker)
Step-05: For all Strikes (of this ExpDate)
Step-06: Calc some important Metrics (like PL%Month for S0, B/E% etc.)
Step-07: From the above Metrics calc a Score that is comparable with other Scores (high score means good)
Step-08: Add this result (together with all classifications) into the ResultTable
Step-09: Sort descendingly the ResultTable for the Score (not necessary if multiset used)
Step-10: Pick the Trade with the highest Score, or those Trades with the highest Scores.
Remarks:
a) With this algorithm, automatically the best trades among all ExpDates and Tickers and Strikes and Strategies will be found! :-)
b) Step-06 and Step-07 are cruical: you need to invest some time, research, and brains into them, as they are the most important core elements.
c) You need to use "normalized" Metrics (to make them comparable to and with each other). Ie. use the same "base".
For example you can't compare PL% of DTE=8 to PL% of DTE=45 --> you need to normalize to a common base, ie. calc or convert to the same time base, like PL%Monthly or PL%Annualy.
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You need some programming (iterating using for-loops etc).
Here's the generic algorithm in pseudo-code (of course the indendation is important
The algorithm is for single-leg vertical strategies (incl. CoveredCall (CC) when seen/treated as single-leg, and CashSecuredPut (CSP) etc.).
Also some other strategies can be seen/treated as single-leg (just use some creativity...
For (advanced) multi-leg strategies some more loops are required (but it then of course gets much more complicated).
Code:ALGORITHM FOR FINDING THE BEST TRADE CANDIDATES: Step-01: Clear the ResultTable (can also be an array, vector or multiset etc.) Step-02: For all Strategies Step-03: For all Tickers Step-04: For all ExpDates (of this Ticker) Step-05: For all Strikes (of this ExpDate) Step-06: Calc some important Metrics (like PL%Month for S0, B/E% etc.) Step-07: From the above Metrics calc a Score that is comparable with other Scores (high score means good) Step-08: Add this result (together with all classifications) into the ResultTable Step-09: Sort descendingly the ResultTable for the Score (not necessary if multiset used) Step-10: Pick the Trade with the highest Score, or those Trades with the highest Scores. Remarks: a) With this algorithm, automatically the best trades among all ExpDates and Tickers and Strikes and Strategies will be found! :-) b) Step-06 and Step-07 are cruical: you need to invest some time, research, and brains into them, as they are the most important core elements. c) You need to use "normalized" Metrics (to make them comparable to and with each other). Ie. use the same "base". For example you can't compare PL% of DTE=8 to PL% of DTE=45 --> you need to normalize to a common base, ie. calc or convert to the same time base, like PL%Monthly or PL%Annualy.
Can you do that in excel? Although I was an Electrical Engineer once, I was never good at programming. Thank you for sharing the code.
I love that idea.