Making 4% a year selling deep OTM covered calls?

[Saltynuts]

The dividend discount model does not fundamentally work because the terminal value continues exist in perpetuity. So the stocks of companies that pay dividends will reflate as they earn for the next dividend.

I think I see what you are trying to say, but that does not discount the other guy's point that paying 5 cents per share out of capital, leaving the company with 25 cents of capital per share, is much less intuitively an "income" event than is collecting and keeping 5 cents per share on an option premium - the first leaves the company with 25 cents capital, the second 30 cents. That's all I'm going to say on that.

 

[Saltynuts]

OMG, absurd. Either you hold a view an asset appreciates or a view that it depreciates. And if you believe it appreciates then be long else flat or short. If you think an asset depreciates first before it appreciates then take exposure on the short side today and flip later, or else wait and enter a long later. We can't foretell the future but we formulate views and are either long flat, or short. Being long an asset while holding the view it depreciates is an inferior move.

And there are a million things that are wrong about your comment "Selling puts historically has generated a higher return over time than selling calls". I won't get into it unless you specifically ask me for it.

LOL, what is ABSUBD is that you think you can call the stock market or any market 100% of the time. Neither you, nor anyone else, can. Sure, if you were 100% sure the stock or market or whatever was going up, go long 100% with as much leverage as possible. Same on the short side, only reversed. Given that no one can do that, however, the position taken by the hypothetical person in my original example to you could be perfectly reasonable.

"And there are a million things that are wrong about your comment "Selling puts historically has generated a higher return over time than selling calls". I won't get into it unless you specifically ask me for it."

I'm hereby asking for it. I literally made a thread as to who generally makes money, option sellers or option buyers, and several very helpful ETers posted threads that, in general, over time, the sellers of puts tended to outperform all other option sellers/buyers. All ears for any other data.

Thanks!

 

[NoodleStrudle]

You keep switching topics. Nobody claimed to be able to "call the stock market 100% of the time" . You brought it up from nowhere. If you don't have conviction then stay flat. Simple as that. But holding a long position when you believe the price will trade lower shows you apparently have no clue what you are doing

Re put or call writing your analysis is biased and riddled with errors. Put writing does not make it a superior strategy in every circumstance (and not even in this specific thread circumstance) because some anonymous posters made more writing puts than calls. Are you seriously suggesting one should invest real money off the opinions of some anonymous users?

LOL, what is ABSUBD is that you think you can call the stock market or any market 100% of the time. Neither you, nor anyone else, can. Sure, if you were 100% sure the stock or market or whatever was going up, go long 100% with as much leverage as possible. Same on the short side, only reversed. Given that no one can do that, however, the position taken by the hypothetical person in my original example to you could be perfectly reasonable.

"And there are a million things that are wrong about your comment "Selling puts historically has generated a higher return over time than selling calls". I won't get into it unless you specifically ask me for it."

I'm hereby asking for it. I literally made a thread as to who generally makes money, option sellers or option buyers, and several very helpful ETers posted threads that, in general, over time, the sellers of puts tended to outperform all other option sellers/buyers. All ears for any other data.

Thanks!

 

[Saltynuts]

"
New
You keep switching topics. Nobody claimed to be able to "call the stock market 100% of the time" . You brought it up from nowhere. If you don't have conviction then stay flat. Simple as that. But holding a long position when you believe the price will trade lower shows you apparently have no clue what you are doing"

Honestly, you are just not too bright, or English is not your first language and that is not allowing you to compute. I'm giving up trying to explain thinking in possibilities/probabilities.


"Re put or call writing your analysis is biased and riddled with errors. Put writing does not make it a superior strategy in every circumstance (and not even in this specific thread circumstance) because some anonymous posters made more writing puts than calls. Are you seriously suggesting one should invest real money off the opinions of some anonymous users? "

I stand corrected. No one can be this dumb. You are a troll. Have a nice day.

 

[lawrence-lugar]

Making 4% a year selling deep OTM covered calls?"

4% a year...why even entertain a silly, small 4% thought...just invest in the S&P 500, SPY ETF.
The collective market averages way more than 4% per year.

I'm personally not a fan of writing/selling options, too much wasted sitting time on your hands idle.
I would rather buy and trade them much more proactively.
I could do 4% a Day -- and I'm being modest and conservative with that number.

 

[Saltynuts]

Making 4% a year selling deep OTM covered calls?"

4% a year...why even entertain a silly 4% thought...just invest in the S&P 500, SPY ETF.
The collective market averages way more than 4%.

Yea, but what if you could make ~10% in the market IN ADDITION TO the 4% on the calls.

 

[NoodleStrudle]

The usual, name calling and no coherent argument. On ignore

"
New
You keep switching topics. Nobody claimed to be able to "call the stock market 100% of the time" . You brought it up from nowhere. If you don't have conviction then stay flat. Simple as that. But holding a long position when you believe the price will trade lower shows you apparently have no clue what you are doing"

Honestly, you are just not too bright, or English is not your first language and that is not allowing you to compute. I'm giving up trying to explain thinking in possibilities/probabilities.


"Re put or call writing your analysis is biased and riddled with errors. Put writing does not make it a superior strategy in every circumstance (and not even in this specific thread circumstance) because some anonymous posters made more writing puts than calls. Are you seriously suggesting one should invest real money off the opinions of some anonymous users? "

I stand corrected. No one can be this dumb. You are a troll. Have a nice day.

 

[NoodleStrudle]

You could but don't make 4% a day because you want to spare us some peanuts?

Making 4% a year selling deep OTM covered calls?"

4% a year...why even entertain a silly, small 4% thought...just invest in the S&P 500, SPY ETF.
The collective market averages way more than 4% per year.

I'm personally not a fan of writing/selling options, too much wasted sitting time on your hands idle.
I would rather buy and trade them much more proactively.
I could do 4% a Day -- and I'm being modest and conservative with that number.

 

[dinn13]

Thank you all for your inputs. I don't plan to do this often. One of my stocks is gone from $8.50 to $40 in less than 6 months and I really don't want to sell it yet because insiders keeps buying. So I thought I should sell some $50 OTM calls. To be honest I have never sold options before, just simple long call/put.
I just checked the same position which is currently trading at $40/share. I can sell $50 strike June calls with IV of 55% for at least $0.50 or 1.25% in 43 days. Not bad given that I don't have to sell my shares and I can cover my expenses!

I'm using covered calls in similar situations. I'm pricing the calls where I'd like to exit the positions and so don't mind getting assigned and if I don't then I collect that sweet premium. Also will do it if I have a view on the name going sideways or down and very capital efficient which is awesome. I can't actively trade in my PA (run a quant book for a hedge fund so compliance is a bit of a pain) so gives me a bit of leeway to express a view without a bunch of churn. I do it very opportunistically in order to avoid always capping my winners although I'm primarily in names for dividend income.

 

[deaddog]

I own bunch of non-dividend paying small cap stocks, so from time to time I reluctantly have to sell some of my stocks to cover my expenses which comes to around 4% of my portfolio per year. .

Why not just buy stocks that pay a 4% dividend?