Is writing in the money / at the money call is the best way to make consistent / automatic money in the stockmarket?
Consistent way to make money
- Thread starter Optionswriter
- Start date
"Automatic money" -- I like the concept.
No. The best way to make consistent money in options is to buy in the money, at the money, and out of the money Puts & Calls.
Unless you have some edge with the BW timing, it's a good way to underperform just buying the SP500. And, of course, it is less efficient than just doing short puts. I'm assuming you mean covered calls, and not just naked short calls. Many brokers don't allow naked short calls, no matter what your experience and net worth.
<img src="http://ichart.finance.yahoo.com/z?s=%5EBXM&t=2y&q=l&l=on&z=l&c=%5EGSPC&p=s&a=v&p=s"/>
<img src="http://ichart.finance.yahoo.com/z?s=%5EBXM&t=2y&q=l&l=on&z=l&c=%5EGSPC&p=s&a=v&p=s"/>
I was referring to in the money and at the money covered calls
I am finding it to be a good way to outperform general market when everything is flat. It definitely beats buy and hold investing.
Perhaps the return is not as high as swing trading
but I like consistent money every month
Anyone also do covered calls on regular basis? Do you think in the money covered calls is almost a sure way to make consistent money on regular basis? Please share your thoughts
I am finding it to be a good way to outperform general market when everything is flat. It definitely beats buy and hold investing.
Perhaps the return is not as high as swing trading
but I like consistent money every month
Anyone also do covered calls on regular basis? Do you think in the money covered calls is almost a sure way to make consistent money on regular basis? Please share your thoughts
Can you provide a specific stock example using Friday's closing prices to show what you are trying to do? I have been writing calls lately against stock I own to generate premium and to get out of a portion of the stock if I get assigned.
I'm very interested in the strategies you are referring to. I'm always looking to learn about options.
Take care,
FT71
Many many many many MANY posts on ET about this subject. Here is one more...
1. A short put is synthetically the same as a cov call. Yeah, there are small differences, but it's the same risk graph and a short put just takes one commish to trade.
2. IMHO selling a call on stock you own may have some use if you want to sell the stock at a certain target anyway, otherwise...
3. For an investor that wants to buy and hold lots of stock, selling an OTM put on a stock you want for your port might make sense, otherwise...
4. Doing CCs or buywrites (or even naked short puts in a lot of cases) is a fairly poor way to trade. There are many better uses of your account margin.
Just my opinion. There are many ways to trade and make money. If it works for you, just keep it up and be rich.
Good trading to all.
1. A short put is synthetically the same as a cov call. Yeah, there are small differences, but it's the same risk graph and a short put just takes one commish to trade.
2. IMHO selling a call on stock you own may have some use if you want to sell the stock at a certain target anyway, otherwise...
3. For an investor that wants to buy and hold lots of stock, selling an OTM put on a stock you want for your port might make sense, otherwise...
4. Doing CCs or buywrites (or even naked short puts in a lot of cases) is a fairly poor way to trade. There are many better uses of your account margin.
Just my opinion. There are many ways to trade and make money. If it works for you, just keep it up and be rich.
Good trading to all.
If you want to make consistent money selling options (usually), selling OTM bear call verticals on the SPX may make sense (you still need some sort of o/b edge to make it work imho).
Opcoach has a long thread on condors, but after living (and trading options) thru the bad ole dayz of 2000-2003 (tech crash, 9/11, etc,) where the friggin market went down week after week, I tend to stay away from potential big losses from large down-moves. I don't do the bull put side.
Up moves can be swift, but, at least for the SPX, getting out of a bad bear call is nothing like waking up to planes crashing into the WTC with a week-long trading halt.
Opcoach has a long thread on condors, but after living (and trading options) thru the bad ole dayz of 2000-2003 (tech crash, 9/11, etc,) where the friggin market went down week after week, I tend to stay away from potential big losses from large down-moves. I don't do the bull put side.
Up moves can be swift, but, at least for the SPX, getting out of a bad bear call is nothing like waking up to planes crashing into the WTC with a week-long trading halt.
Hi FT71, Im writing in the money / at the money call options over Australian stocks.
For example, I bought stock at $6.5, write calls at strike $6.25 and get 33 cent premium per stock.
My maximum profit is 8 cent per share (33 premium - 25 cent). The downside protection given is substanitial as my new breakeven point on share purchase after writing the option is $6.17 ($6.50 - 33 cent)
Sometimes I write at the money call option too over the stocks I own. Hope this makes sense.
For example, I bought stock at $6.5, write calls at strike $6.25 and get 33 cent premium per stock.
My maximum profit is 8 cent per share (33 premium - 25 cent). The downside protection given is substanitial as my new breakeven point on share purchase after writing the option is $6.17 ($6.50 - 33 cent)
Sometimes I write at the money call option too over the stocks I own. Hope this makes sense.
Wayne, I see your strategy doing OTM bear call verticals on SPX. Actually I have been selling call and put option for a futures contract (eg: SP500)
My question is how do you protect yourself if SPX goes up after you initiated a bear spread position? Do you just close the option position at a loss or hedge with futures?
My question is how do you protect yourself if SPX goes up after you initiated a bear spread position? Do you just close the option position at a loss or hedge with futures?