Protecting a covered call position

[DTB2]

• Buy the stock only.
• The short call will act as an anchor to your trade.

An anchor? Do you know how far a stock will run?

 

[OptionsOptionsOptions]

An anchor? Do you know how far a stock will run?

No ..... that's why you don't sell calls to go with your long stock position.

 

[DTB2]

No ..... that's why you don't sell calls to go with your long stock position.

And you know when it's going to turn down too, right? Or stumble along in consolidation?

Or do you only buy stocks that go up_LOL

 

[wildchild]

• I never posted they where -so don't quote my posts and throw that in there.
  
• I don't like Covered Calls - as my posts indicate.

I understood your post completely. I dont see what the problem is.

 

[Pekelo]

• I don't like Covered Calls - as my posts indicate.

Nobody gives a shit. Most of your responses were not related to the question. Your personal preference is irrelevant, so get the hell out of my thread.

 

[FSU]

Pekelo, to add a bit,

If you decide to exit your position, put it in as a spread, both the call and the stock together. Most likely the calls have a wide quoted market as they are deep in the money. The spread market should be fairly tight.

 

[OptionsOptionsOptions]

• I never posted they where -so don't quote my posts and throw that in there.
  
• I don't like Covered Calls - as my posts indicate.

Nobody gives a shit. Most of your responses were not related to the question. Your personal preference is irrelevant, so get the hell out of my thread.

My responses were to other posts - not yours. Most ET threads get multiple responses and some replies are directed to those responses and may not related to the original question.

My 1st post to your question was:

Q: Protecting a covered call position?
A: The long stock position is your protection/insurance.

In short your Covered Call is already protected due to its structure. The long stock protects you from unlimited losses. No other action is needed.

 

[spindr0]

What is the issue?

• Low premium collected.
• If ABC got to $110 it will most likely settle well above $110.
• The option premium collected will be less than the difference of ABC and the option strike (110.00).
• Options 101 - "There is no free lunch".

If one buys the stock for $100 and has a target sale price of $110 then selling the $110 covered call provides some premium while waiting for the sale order to execute. You're being paid for waiting. If the stock drops, you're also ahead of the guy who was just long the stock.

If you're going to sell the stock at $110, in terms of the covered call sale, it doesn't matter if the stock goes much higher. You're either out at $110 (long stock only) or out at $110 plus the premium. Low premium or not, you're further ahead with the CC.

You may not like covered calls but that doesn't change the benefit of getting paid to wait.

In general, I don't like the R/R of a CC but for the everyday investor with a target exit, they provide some extra bang for the buck (income).

 

[Pekelo]

To give a real life example, I have a thread on Bitcoin trading with CC and CSP. I went long BTC at 8K and sold the 2 weeks expiry 8K strike calls for $640. BTC did run up to 9K at that point I was fairly sure it would drop back. This is where my original question would have applied.


Eventually after a week I switched to a CSP position, taking a $500 gain caused by the time decay...

 

[spindr0]

In short your Covered Call is already protected due to its structure. The long stock protects you from unlimited losses.

Owning the stock protects the broker not the investor who bears all of the downside risk. Unlimited losses? Have you seen any stocks go to infinity lately?