You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Selling covered call on ETFs
- Thread starter osho67
- Start date
Quote from osho67:
Yes I am not convinced. May be it is just in my mind. Covered call looks a bit more comfortable. I can always hope shares will go up. With a naked put once I am assigned my losses are crystalised.
You kidding, right!?
Once you are assigned on a short put you can also hope the shares will go up, as you would be long the shares, which is exactly the same.
Quote from osho67:
Yes I am not convinced. May be it is just in my mind. Covered call looks a bit more comfortable. I can always hope shares will go up. With a naked put once I am assigned my losses are crystalised.
LOL, why you're even in this profession is beyond me. What the others wrote in regards to the strategy is not up for debate, risk-reward is identical. Accept it.
Quote from osho67:
Yes I am not convinced. May be it is just in my mind. Covered call looks a bit more comfortable. I can always hope shares will go up. With a naked put once I am assigned my losses are crystalised.
Many are not convinced when they are beginners. Take my word for it, you will be convinced later.
But, if writing covered calls makes you more comfortable, then write covered calls. Statements such as these should not bother you:
a) "LOL, why you're even in this profession is beyond me. What the others wrote in regards to the strategy is not up for debate, risk-reward is identical. Accept it."
b) "You kidding, right!? Once you are assigned on a short put you can also hope the shares will go up, as you would be long the shares, which is exactly the same."
If you are interested, here is a simple proof that the covered call is equivalent to the naked put: But as I said, if not comfortable, don't trade naked puts.
http://blog.mdwoptions.com/options_for_rookies/2008/07/equivalent-posi.html
Mark
Quote from l2tradr:
LOL, why you're even in this profession is beyond me. What the others wrote in regards to the strategy is not up for debate, risk-reward is identical. Accept it.
Equivalency is not obvious to the rookie. Give this guy a chance to learn.
Nor is everyone a professional.
Mark
Quote from l2tradr:
I agree that I was a little harsh. But asking a question and not agreeing with the answer without any valid reason is not the way to go either.
Yes I am learning. My first book on options was Options as a stategic investment by McMillan. There Covered call writing is from page 31 to 86. I was so impressed and thought this was a holy grail. In the Bull market I have done so well. Three income-1 Premium income , 2- Profit from stock (selling at a higher price than buying price. and 3- dividend income.
But now I am learning new concepts . I assure you ,you have not been a little harsh to me. I have enjoyed all the input on this thread.
Quote from osho67:
In the Bull market I have done so well. Three income-1 Premium income , 2- Profit from stock (selling at a higher price than buying price. and 3- dividend income.
But now I am learning new concepts . I assure you ,you have not been a little harsh to me. I have enjoyed all the input on this thread.
Writing covered calls (selling naked puts) is a fun way to trade. In an up market. This is a bullish strategy and does not do well when markets head lower.
I also spend many pages on covered call writing (The Rookies Guide to Options), but that's to introduce the reader to how options work.
Once you gain some experience, you will want to move on less risky strategies. But go at your own speed and be alert to having too much money at risk.
Mark
selling puts you only have to do one transaction to open the position.
Writing calls you have to do two transactions to open the position which means you pay twice the commission VS the put.
Covered call is fine if you already own the underlying and want are willing to sell at a specific price but want to get paid a premium while waiting to hit your price point.
Writing calls you have to do two transactions to open the position which means you pay twice the commission VS the put.
Covered call is fine if you already own the underlying and want are willing to sell at a specific price but want to get paid a premium while waiting to hit your price point.