Selling covered calls for a premium....how far out?

[ironchef]

I have been trading options, sell covered calls the last year or so. Lately I have been getting in and out of the sell covered calls and barely waiting for them to expire, some etfs I trade are volatile and can move the option a few dollars a day, even ones expiring in 3 to 6 months. Is it better to trade a sell covered call months out or stick with closer options expiring a week or month out?

What is the recommended trade technique with these type of option trades?

A stupid question:

Why, for someone with your years of experience, do you want to write covered calls?

 

[CannonTrading_Ilan]

Would you ever sell a covered call that's below your cost average price but the credit covers enough where if the stock is assigned away you still walk away with a profit?

I only work with futures and future options....

 

[tradegoodstocks]

The shorter you come in time the more gamma risk you expose yourself too. Sell quarterlies if you want to short vol. Lazy way add the ATM combo and go one further strike out.
Want to juice up your returns create syn straddles ( sell options in a 2:1 ratio. 100 shares sell 2 options at the 20 delta mark) At a strike touch you will be up, you can roll to the next quarterly or close the whole position.

The benefit of selling 2 options at 20 delta in comparison to e.g. selling one option at 40 delta would be less gamma? If so, noted; but how would the theta compare?

Correct me if I'm wrong, but I think this would lead to taxable gains but non-tax-deductible losses (until the stock is sold) on the options, with accordingly bad after-tax returns of the strategy in taxable accounts.

 

[tradegoodstocks]

I personally like to sell 45 days or less
I try to sell covered vertical calls or vertical put spreads - again my personal preference after 25 years as a broker/ futures trader.
https://www.cannontrading.com/tools/education-futures-options-trading-101

Would you mind shedding some light on your rationale? How does 45 days compare to 30 days or 90 days in terms of gamma risk (need to rebalance or hedge more or less frequently), assignment risk, theta exposure per risk, effective trading spreads and all-in trading cost per exposure? Any other considerations?

Also, do you roll (e.g. at the 21 days mark)?

Lastly, why do you do this with futures options instead of SPX options? My understanding is that the spreads and all-in trading cost are somewhat higher with FOPs than with SPX options.

Thanks in advance.

 

[Nighthawk]

I personally like to sell 45 days or less
I try to sell covered vertical calls or vertical put spreads - again my personal preference after 25 years as a broker/ futures trader.
https://www.cannontrading.com/tools/education-futures-options-trading-101

And what´s the track record selling the covered vertical calls/put spreads after 25 years? You should be retired by now, don´t you think?

 

[CannonTrading_Ilan]

And what´s the track record selling the covered vertical calls/put spreads after 25 years? You should be retired by now, don´t you think?

lol...I do this as a broker with different clients who have different preferences. I do not do this as money manager.

 

[CannonTrading_Ilan]

Would you mind shedding some light on your rationale? How does 45 days compare to 30 days or 90 days in terms of gamma risk (need to rebalance or hedge more or less frequently), assignment risk, theta exposure per risk, effective trading spreads and all-in trading cost per exposure? Any other considerations?

Also, do you roll (e.g. at the 21 days mark)?

Lastly, why do you do this with futures options instead of SPX options? My understanding is that the spreads and all-in trading cost are somewhat higher with FOPs than with SPX options.

Thanks in advance.

I do this with futures options only. Variety of markets like crude oil, SP futures, gold, bonds etc.
Depending on the set up, the market, the signals and the clients I work with.

Each trade can be different and i shared the above as a general preference/observation and not as a pure trading model.

Bottom line you still need to be right where the market isa going or not going within the time frame.

 

[ironchef]

lol...I do this as a broker with different clients who have different preferences. I do not do this as money manager.

Are your clients happy with their results? Just curious because I wasn't happy with my covered call trades.

 

[CannonTrading_Ilan]

Varies to be honest....I think that selling premium using vertical call spreads and vertical put spreads is a good strategy to explore but there are many factors that go into the mix:
Trader's risk appetite, the specific underlying market and volatility, alternative strategies.

 

[ironchef]

Varies to be honest....I think that selling premium using vertical call spreads and vertical put spreads is a good strategy to explore but there are many factors that go into the mix:
Trader's risk appetite, the specific underlying market and volatility, alternative strategies.

Thanks.

Yes, posters like @taowave told me to try spreads too.