Depends on when or if I had to sale. At the top of a bull market, I would make more by just holding. In the middle of a bear market, I believe I would make more using the covered call strategy...
Best way to pick strike price for covered calls?
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Depends on when or if I had to sale. At the top of a bull market, I would make more by just holding. In the middle of a bear market, I believe I would make more using the covered call strategy...
I think it’s very important to know yourself and accept the outcomes. When 2008 crisis hit, I felt “betrayed” by the financial system and I said to myself: I don’t care if I underperform the market, but I will never trust the establishment again with my money. It’s much easier for me to forgive myself for under-performing than to forgive myself for letting someone else loose. (Rob?) my money.
Define a "long-lasting bear market", and after that, find a market that fits that description.
When you do, I will give you the answer to why what you answer with will never again happen.
It’s an easy question to answer you buy a stock and sell a call. What would your pnl have been if you didn’t sell the call? Surely you do this analysis to see if selling the call makes sense.
I'll make it easy for you...I can't do it myself (if I copy and paste you can glean my info). Look up ADM at Yahoo Finance. Go to the longest chart you can find on the company. Also look at Coke (KO). It seems like Warren Buffet was ALWAYS adding more Coke to Berkshire!! Buy it on any dip...Covered call it with a leap. Wash rinse repeat.
I use to own stock in Hershey (HSY). I worked as a contractor for the company for years. They worked so hard to make their quarters...Bonus. They would keep the plant open with glue, duck tape, and wire...Just for that quarter. Would have great profits...Stock would rise!! But everyone knew that the next quarter was going to be trash (deferred maintenance would be done)...Bad quarter, "the sky is falling". Step in and buy!! I've taken a moral stance against HSY...Won't buy their stock again. They would build clean water wells in Africa and sell the water to the people...While the people's wells would run dry!!
In today's world, things are different (US printing money like madmen). That is why I have held back on many of my options. I've done a reversal on many of my stocks. I will do both...Buy and hold AND do options (covered calls) on the same companies (BG, XOM, ADM, BP, Apple, KO, QQQ, LOW). Maybe 100 shares buy and option (covered call) at Fidelity, while I hold 100 shares of the same company at Schwab.
I now tend to write options on companies that are interest sensitive...They could drop, but I believe they will grow (or get bought out) so it is like covering my investment. Here...I'll throw out five...And again, these options are only 10-15% of my stock/mutual fund investments. Here are the 5; EVGO, NWE, MTOR, VZ, CCS.
This is the way I do my investments. The more I share, the bigger the rabbit hole gets...Just don't want to go down it. This way works for me and my wife. Just me.
that's got nothing to do with options...you're a long term investor who collects a couple of pennies per dollar risk.
Don't get me wrong, I salute you. But your primary PnL driver is your stock pick, which you're apparently good at.
Matt_ORATS
Sponsor
We did a large backtest on covered calls. https://blog.orats.com/covered-call-backtest-finding-the-best-maturity-strike-iv-and-earnings-methods
Results
The best maturity was 30 days to expiration and best delta was 0.10.
Avoiding earnings was better than trading through earnings.
Holding to expiration was better than exiting after profit.
A call value of a percent of stock price that was best was 2.0%.
The best use of IV percentile and slope was selling a call when the IV percentile was above 66%. Slope percentile was not important for identifying the best calls to sell.
Results
The best maturity was 30 days to expiration and best delta was 0.10.
Avoiding earnings was better than trading through earnings.
Holding to expiration was better than exiting after profit.
A call value of a percent of stock price that was best was 2.0%.
The best use of IV percentile and slope was selling a call when the IV percentile was above 66%. Slope percentile was not important for identifying the best calls to sell.
That's interesting, @Matt_ORATS
Similar to @Cabin111 I hold stock on a portfolio of mainly Dividend Aristocrats in my pension fund, and write calls.
What works for me is to time sales - not automatically sell - for the following Friday (so 7-11 DTE). I sell 25 delta and roll if price moves up so that the strike is at 75 delta. This seems to be accretive most of the time, so that cash (combined with dividends) in the account increases so that I can buy more stock. In the instance of a sudden uplift in stock price, I usually roll out the calls for a few weeks until the strikes catch up. I had to do this with Apple recently and am now back to 172.5 Calls (sold for c.USD4) expiring 07 Jan with stock at c.USD173.
It requires very little effort, and adds 1-2% to account balance most months. My journal on here is the stuff that takes more effort and provides greater rewards, but I never lose sleep over the Covered Calls.
Similar to @Cabin111 I hold stock on a portfolio of mainly Dividend Aristocrats in my pension fund, and write calls.
What works for me is to time sales - not automatically sell - for the following Friday (so 7-11 DTE). I sell 25 delta and roll if price moves up so that the strike is at 75 delta. This seems to be accretive most of the time, so that cash (combined with dividends) in the account increases so that I can buy more stock. In the instance of a sudden uplift in stock price, I usually roll out the calls for a few weeks until the strikes catch up. I had to do this with Apple recently and am now back to 172.5 Calls (sold for c.USD4) expiring 07 Jan with stock at c.USD173.
It requires very little effort, and adds 1-2% to account balance most months. My journal on here is the stuff that takes more effort and provides greater rewards, but I never lose sleep over the Covered Calls.
you can find 10 delta calls, 30 DTE at 2percent premium?
Matt_ORATS
Sponsor
Yes, but those represent ranges, ie 10 delta is min-max 5-14, DTE is 20-45, and premium is -2.6% - -1.4%. There are not many but they show up in our scanner daily.
Here are some current ones. I neglected to filter on earnings but the orange 'E' would be ignored in the backtested scan mentioned above.
The picture is a little blurry but you can see the filters colored in black, for example S% is our smoothed theoretical value edge percent and I have set a +-5% to filter out wide markets.
