Covered call is more risky than it appears?

Good question Cache ,

Selling OTM for tiny premiums is a pro game. Risk reward for a retail trader is terrible. Selling insurance is a good job but if you have a retail account go for the ATM 1.00 + premium then the "juice" is less a factor.
 
Quote from Cache Landing:

and he would probably be better off investing in a mutual fund.
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mutual fund is more prone to drawdown and doesn't expand the mind.
 
Going short 100 contracts at 0.25$ in a retail account is a suicide .

you will capture 2500$ 19 out of 20 times ( that is + 47 500$) THEN get hit once for 4.50$ ( that is - 45 000$).

SO YOU are a winner not .
why because you might get the -45000$ on your first trade...

Lets say you are good forget about going delta neutral paying retail commision cmon.

you will receive 47 500 minus 45 000 = 2500$

minus 20 times 100 contract commish


good luck
 
Buy1Sell2,

If you are successful ratio spreading, then I congratulate you. However you said delta is the only greek you have a slight understanding of, and at that you don't pay much attention to it. True time is on your side, but the main risks of ratio or naked selling is vega and gamma. If you have been 'successful' you obviously have a way of managing positions. I would guess that the stock selection is most important. Try OSIP 04-20-04 naked to the upside to see what I mean by stock selection. While you may have been succesful in selling naked or half hedged premium, please don't advocate it's the only way to go as some newbie may try that without the experience and blowout, never to return again with their capital. Then how would I eat?
 
Quote from jj90:

Buy1Sell2,

If you are successful ratio spreading, then I congratulate you. However you said delta is the only greek you have a slight understanding of, and at that you don't pay much attention to it. True time is on your side, but the main risks of ratio or naked selling is vega and gamma. If you have been 'successful' you obviously have a way of managing positions. I would guess that the stock selection is most important. Try OSIP 04-20-04 naked to the upside to see what I mean by stock selection. While you may have been succesful in selling naked or half hedged premium, please don't advocate it's the only way to go as some newbie may try that without the experience and blowout, never to return again with their capital. Then how would I eat?
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It is all about management. I never overextend so I agree with that point. Just as clarification again--I don't trade options on stocks--only futures. There are futures markets where it is difficult to get hurt for a newbie. Newbies ( let alone oldbies)have no idea at all which direction market is headed or where to set stops etc, so short options is without a doubt where they need to be. Accounts blow out much quicker trading outrights. Thank you for your post here and I will look at the stock you mentioned .
 
In reality anytime anyone states they have the "only way to go" in reference to any financial investing, it's usually a farce. Anyone that has traded options for any length of time will tell you that, yes, they do have favorite strategies that they are more comfortable with than others, but usually all the successful options traders I have come to know over the years will say that the appropriate strategy to use "depends".

One of the most remarkable and fantastic things about our markets is the fact that there is NO ONE SIZE FITS ALL strategy. There are numerous ways to be successful. Options, to those willing to learn, just offer a more flexible way to be successful, but to say that one particular strategy is superior to another is just plain wrong. To some, options are something just short of voodoo, yet for others they're the only way to go. It's all situational my good man, and options allow a strategy for just about every situation. It's up to you, the individual to choose the options tool best for the job at the particular time. With all that being said, there is no doubt that there are numerous traders that are successful beyond you and I put together that have never and will never even think about trading options.

B1S2, I am happy for you that you are successful trading and have developed an edge that works, but be very careful stating you have something that no other has and is the best. Hence the reason for my smart ass post towards the start of this thread. Pride usually cometh before the fall.
 
Quote from Algorithm:

In reality anytime anyone states they have the "only way to go" in reference to any financial investing, it's usually a farce. Anyone that has traded options for any length of time will tell you that, yes, they do have favorite strategies that they are more comfortable with than others, but usually all the successful options traders I have come to know over the years will say that the appropriate strategy to use "depends".

One of the most remarkable and fantastic things about our markets is the fact that there is NO ONE SIZE FITS ALL strategy. There are numerous ways to be successful. Options, to those willing to learn, just offer a more flexible way to be successful, but to say that one particular strategy is superior to another is just plain wrong. To some, options are something just short of voodoo, yet for others they're the only way to go. It's all situational my good man, and options allow a strategy for just about every situation. It's up to you, the individual to choose the options tool best for the job at the particular time. With all that being said, there is no doubt that there are numerous traders that are successful beyond you and I put together that have never and will never even think about trading options.

B1S2, I am happy for you that you are successful trading and have developed an edge that works, but be very careful stating you have something that no other has and is the best. Hence the reason for my smart ass post towards the start of this thread. Pride usually cometh before the fall.
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I didn't say I had something that no one else has, but it certainly is the highest probabilty play
 
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