Covered Calls: from here to there.

[Luto]

Let me start my saying that it really is greek to me. This is the first time I have considered doing this.

Here is the scenario to assume.

Long 5000 shares, say MSFT, which will be held for 4-6 years from today. By that time it is expect to be closer to 50 a share and I will sell 1/2 the Long, maybe. In the meantime I want to generate small amounts of cash with low risk. Obviously I could sell covered calls.

However, I assume that I will be learning greek and I am a reasonable and profitable trader (day and small swing).

So I don't want to nilly willy just start selling some Jan 06 calls. I need a strategy to map out a path as I learn. Just like trading 100 shares when your cash allows 50 times that, I want to start with real options trading but small amounts and build over time.

So could the greek "gods" offer suggestions on a where to start. Which greeks should I be looking at first. Strategies to examine? Things to watch out for?

Feel free to reply in greek as I will translate at my leisure.

Thanks in Advance!

 

[murray t turtle]

Quote from Luto:

Let me start my saying that it really is greek to me. This is the first time I have considered doing this.

Here is the scenario to assume.

Long 5000 shares, say MSFT, which will be held for 4-6 years from today. By that time it is expect to be closer to 50 a share and I will sell 1/2 the Long, maybe. In the meantime I want to generate small amounts of cash with low risk. Obviously I could sell covered calls.

However, I assume that I will be learning greek and I am a reasonable and profitable trader (day and small swing).

So I don't want to nilly willy just start selling some Jan 06 calls. I need a strategy to map out a path as I learn. Just like trading 100 shares when your cash allows 50 times that, I want to start with real options trading but small amounts and build over time.

So could the greek "gods" offer suggestions on a where to start. Which greeks should I be looking at first. Strategies to examine? Things to watch out for?

Feel free to reply in greek as I will translate at my leisure.

Thanks in Advance!

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%
Luto;
MSFT makes great products,
actually one of the few non index stock options thats plenty liquid
but its been a notable underperformer in this bull market.

Sure i like medium & long trends;
but prefer english , some hebrew, & some spanish more than greek.

 

[ig0r]

rather than selling calls so far out, you'd probably be better off selling front month calls (up to maybe 1/2 of your position). if you get assigned you can either leave it at that or rebuild your position.

another option is to sell puts naked (the equivalent of covered calls) without a long underlying position as you suggest, the idea is that unless you are in a hurry to buy the stock, you will pick up premium for X amount of months until you are finally assigned the stock which you will now hold (you wanted the stock anyways). Alternatively, If MSFT begins to take off then you will miss out on profits because you weren't long underlying but at least you will be picking up premium along the way from the short puts.