Covered Call Trading Tools

Andiroo

Andiroo

Hi All

I am looking to develop a portfolio of covered calls using reasonably high yielding large cap stocks. I currently trade on IB. I am new to Options / Covered calls albeit i have been trading equities, futures and forex for 20+ years. Can anyone suggest some basic resources and tools to help determine optimal strategy creation.

Best

Arb
 
Andiroo said:
Hi All

I am looking to develop a portfolio of covered calls using reasonably high yielding large cap stocks. I currently trade on IB. I am new to Options / Covered calls albeit i have been trading equities, futures and forex for 20+ years. Can anyone suggest some basic resources and tools to help determine optimal strategy creation.

Best

Arb
More...
Here you can try it out:
http://optioncreator.com/
You can add multiple positions of stocks and/or options...
 
Andiroo said:
I am looking to develop a portfolio of covered calls using reasonably high yielding large cap stocks.
More...

The secret to making money at this is not the option side, but the stock selection process. You need a process that will pick winners. The dividend and call premium will NOT cover your losses if you have the wrong stocks. And, the options will limit your gains. I'm not a big believer in the strategy.
 
I am developing my screens for the stock selection process. I am looking at very long dated ITM options (typically 20-30% below current stock prices). I am comfortable with the limit on the upside for this is purely being created as an income producing portfolio. I have other short term trading and long term investment portfolios alongside.
 
Covered calls are great for generating extra revenue, as long as you're ok with the equity being called away.
Tons of free resources online. All free. Just search.
 
Andiroo said:
I am developing my screens for the stock selection process. I am looking at very long dated ITM options (typically 20-30% below current stock prices). I am comfortable with the limit on the upside for this is purely being created as an income producing portfolio. I have other short term trading and long term investment portfolios alongside.
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ITM options don't fit in with Covered Calls. CC's are long stock plus OTM calls, you want the OTM calls to expire worthless.





:)
 
Covered Calls for income generation is a popular topic and a valid strategy. Lots of articles on the subject. Should be able to get some good hits on 'Covered Calls'+Income.

Some key aspects:
1) The underlying should be an asset you are happy to hold (thus treat it as a normal equity position in that regard)
2) The underlying should be liquid
3) The options for that underlying should also be liquid (no good trying to trade options where the volume is 0 or so low the bid/ask spread is very much against you)
4) You should be okey if you are assigned (and the options are taken away) *AND* if they are not assigned (value drops).
5) Strikes closer to trading value should net you higher premium. So ITM generally good to maximize premium. Far OTM are good only if you want to ensure you hold the position.

When doing the Covered Calls for Income you can not have it both ways (keep the position AND generate premium): You need to choose one in order to maximize your return.

IB has some good option scanners, and it will show you the profit/loss curve to help you understand what you are going to make.
 
Andiroo said:
Hi All

I am looking to develop a portfolio of covered calls using reasonably high yielding large cap stocks. I currently trade on IB. I am new to Options / Covered calls albeit i have been trading equities, futures and forex for 20+ years. Can anyone suggest some basic resources and tools to help determine optimal strategy creation.

Best

Arb
More...
If you dabble in CDN stocks, http://www.m-x.ca/marc_options_info_calc_en.php is worth checking out.
I found covered calls too frustrating, was getting assigned.
 
I tend to just work the probabilites... I write 1 SD out month after month (take advantage of theta) and see if your strikes are getting hit 20-30% of the time. I like covered calls for income because markets rarely melt up and the chance of a melt up (besides earnings or buyout) is pretty slim. Most times i find if price is close it drifts up slowly towards my strike and I have plenty of time to work the position. Also depends if you care about assignment. I avoid assignment and buy back if I'm hovering around the strike on expiration. I personally use excel with ib tools to pick strikes and it isn't very sophisticated. But I find it has worked over time for many years. As mentioned earlier, the key is the underlying and how it behaves. Learn your stocks and you can do well with covered calls imho.
 
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