In addition to the Long/Short portfolios in the '50% return' thread I am also generate very good cash flow by selling options. I sell naked calls exlusively, there is a good reason for this. Since I am selling calls I am betting that a stock will not go up alot so I focus on high priced, low Beta companies that have a very low likelyhood of being bought out or have a big rally. I am sure I can expand on this as questions come up. Anyway I attach my current portfolio to kick this off.
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Generating Cash Flow by Selling Calls
- Thread starter alphastocks
- Start date
Quote from alphastocks:
In addition to the Long/Short portfolios in the '50% return' thread I am also generate very good cash flow by selling options. I sell naked calls exlusively, there is a good reason for this. Since I am selling calls I am betting that a stock will not go up alot so I focus on high priced, low Beta companies that have a very low likelyhood of being bought out or have a big rally. I am sure I can expand on this as questions come up. Anyway I attach my current portfolio to kick this off.
selling naked calls probably is one of the worst ways to make money. high risk low reward. if it works for you keep doing it.
Quote from vhehn:
selling naked calls probably is one of the worst ways to make money. high risk low reward. if it works for you keep doing it.
Thank you, that is what the text books say. In the real world it is not the case. Shorting naked calls is less risky and more rewarding than shorting stocks, unless the market takes a nose dive, then the chances are that the stock shorts will outperform the call shorts.
Lets look at FDX 110 Sept Call that I shorted yesterdays at 3.30. FDX is last traded at 107.4 and if it closes anywhere below 110 by Oct 20 I make $330, which is 3% return in 1 month. In order for me to make the same 3% from shorting a stock FDX must go down to 104. Theoretical risk is one thing, the probability of the outcome is something else.
But vhehn is right that shorting options gives you limited upside and unlimited downside so it might not be appropriate for everyone, but it works very nicely for me.
Just sold 1 DVN 65 Oct Call at 2.0
By the for disclosure purposes I also run a website www.alphastocks.com...
"Here is a complete backtest of the performance for the last 5 years. The strategy has been traded in an actual account since late 2005 with results that confirm the validity of the backtest:"
so you have about a year of real trading. are you up 50% in that year in your trading account? i dont see it on the website.
Quote from vhehn:
"Here is a complete backtest of the performance for the last 5 years. The strategy has been traded in an actual account since late 2005 with results that confirm the validity of the backtest:"
so you have about a year of real trading. are you up 50% in that year in your trading account? i dont see it on the website.
As of now there is no information on this Call writing strategy on the website. The backtest you are referring to is for a long only portfolio that I run. My actual return on the Long portfolio as of the time of that writing was up around 20% on the year, which was inline with the backtest.
Quote from Prevail:
what are your exits for the call positions?
1. Stop on the underlying
2. If I can buy it back at 10 Cents
3. If my technical indicators singal a likely bounce in the stock
4. Expiration
For example today I bought back MYL 22.5 Oct Call at $0.10, which I sold for $0.78.