Could you please elaborate? Wouldn’t he have to manage this position?
Best way to pick strike price for covered calls?
- Thread starter spinn
- Start date
Covered call
Synthetic 1x2
Synthetic fly.
He only want's to hedge his portfolio for tax reasons. Covered calls look like shit because they don't cap the downside. Synthetic 1x2s have unlimited upside risk so I would not hedge a portfolio of biotechs with them.
But if he owns a bunch of large caps that don't necessarily have the risk of being taken over, it's the best bet for just holding it over a couple of weeks and before liquidating the entire portfolio
first of all, selling options for income is probably one of the bigger scams retails falls victim to over and over again. There is no income, it's just a stat vol vs implied vol bet, period.
Second, he stated he wanted to hold positions at least until JAN22 for tax resons (OPs 2nd post) and then sell them like so many of private investors do and a covered call is probably the most idiotic way to do this since it doesn't give any downside protection at all
first of all, selling options for income is probably one of the bigger scams retails falls victim to over and over again. There is no income, it's just a stat vol vs implied vol bet, period.
Second, he stated he wanted to hold positions at least until JAN22 for tax resons (OPs 2nd post) and then sell them like so many of private investors do and a covered call is probably the most idiotic way to do this since it doesn't give any downside protection at all
+1. Covered calls aren’t income. They are a type of capital gains with as much risk as being outright long stocks.
I understand what you are saying...Sell to open on stocks you own. I have done it for 20 years...I get roasted on this site, but I keep doing it. Below I will share with you what I would do now and in Jan 2022 after the options expire.
I would SALE the stocks that have risen greatly now. Yeah, you will have to pay the 2021 taxes in April 22 (or do a tax extension).
Here is what the beta of a stock means.
What Is Beta? Beta is a measure of a stock's volatility in relation to the overall market. ... If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.
If I were you I would sell the high beta stocks now...It case the market falls. The lower betas you could do the covered calls. You will only get smaller amounts since they are not high flyers. Two examples...a high tech company that has risen greatly, but is subject to higher interest rates...Sell now. If it is something like Apple (that has tons and tons of free money on the sidelines)...Do the covered call. If it something like ADM (widow and orphan companies) you could do covered calls also.
Lastly...It is no sin to pay taxes. You could make more by selling now and take the profits, rather than hoping the stock prices will be at the same price in Jan 2022.
Also in December people will glean their profits and loses for the year...Market can do strange things in this month. Good luck...
I would SALE the stocks that have risen greatly now. Yeah, you will have to pay the 2021 taxes in April 22 (or do a tax extension).
Here is what the beta of a stock means.
What Is Beta? Beta is a measure of a stock's volatility in relation to the overall market. ... If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.
If I were you I would sell the high beta stocks now...It case the market falls. The lower betas you could do the covered calls. You will only get smaller amounts since they are not high flyers. Two examples...a high tech company that has risen greatly, but is subject to higher interest rates...Sell now. If it is something like Apple (that has tons and tons of free money on the sidelines)...Do the covered call. If it something like ADM (widow and orphan companies) you could do covered calls also.
Lastly...It is no sin to pay taxes. You could make more by selling now and take the profits, rather than hoping the stock prices will be at the same price in Jan 2022.
Also in December people will glean their profits and loses for the year...Market can do strange things in this month. Good luck...
That's hilarious. Are you consistently making money?
I've been here a long time and it amazes the me the number of people that dump on strategies they don't like or don't make money for them. I've met all manner of people over the years that have all kinds of crazy voodoo that would never work for me, but I love that they can make it work for them. Personally... I try to learn something from those folks instead of crapping on them, but I might be in the minority here.
Yeah, I am making money thank you!! I only write about 10-15% of my stocks to options (covered calls). You do not need to do things like iron condors or butterfly spreads. Yes, I lose out on major upside of stocks. But, many of my options expire out of the money...I'll write another one. Solid cash flow on dividend paying stocks...Not rocket science.
Here is a thread I did about some Apple stock I bought. Hope to net about $5,000. when all is said and done (option money, dividends, profit, 3% return on the option money/dividends compounding). Who do you think sells on the other side of your puts?? Others are out there looking for income...
https://www.elitetrader.com/et/threads/another-boring-covered-call-i-did-yesterday-apple.359340/
Last edited: