What to make of this strategy?

Quote from atticus:

Yes to IB. No to commissions. I pay the standard rate and unbundled on futures. I deal with a prime as well. Only family trades IB F&F.
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Unbundled with equites can save a chunk on commish, particularly if you add liquidity. Does unbundling apply to options as well?
 
Do you always go atleast one whole strike OTM?

What ifs stocks att 55.3 and the call is at strike 55, the most premium would then be att 55 naturally.
 
Quote from spindr0:

Unbundled with equites can save a chunk on commish, particularly if you add liquidity. Does unbundling apply to options as well?
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They offer discounts on a volume basis, but you don't opt-in. Below 10k/month it's $0.70 per contract on prems > $0.10.
 
Quote from HowardCohodas:

Write ATM PUT on stock (or other underlying that involves delivery).

If PUT expires worthless, repeat write ATM PUT.

If Exercised (take delivery), write ATM CALL.

If CALL expires worthless, repeat write ATM CALL.

If Exercised (called away), go back to selling ATM PUT.
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The worst case scenerio for this strategy is:

let say you get assigned for your short put (take delivery) for QQQ at $50.

You immediately write a call at $50 and take in a premuium of (let say) = $1.

And you know what, QQQ jump to $60 in the expiration month and now you are lossing $9 (QQQ been called away at $50 and you only get a premium of $1 for $50call, $60-$50-$1 = $9 LOSS).

If you go for 10 contracts, you are losing $9000.

This strategy is the biggest loser in the super GAP UP/Bull market and NOT in the down market.

Interesting, right ?

I would rather use a calendar than a stock to hedge the short call or put.
 
Quote from galvinlee888:

The worst case scenerio for this strategy is:

let say you get assigned for your short put (take delivery) for QQQ at $50.

You immediately write a call at $50 and take in a premuium of (let say) = $1.

And you know what, QQQ jump to $60 in the expiration month and now you are lossing $9 (QQQ been called away at $50 and you only get a premium of $1 for $50call, $60-$50-$1 = $9 LOSS).

If you go for 10 contracts, you are losing $9000.

This strategy is the biggest loser in the super GAP UP/Bull market and NOT in the down market.

Interesting, right ?

I would rather use a calendar than a stock to hedge the short call or put.
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That's an opportunity loss. In reality, you made $1,000 from the covered call plus the original short put premium.

Your math on the CC should be $50- $50 + $1 = $1 gain

If you legged out at parity it would be $60 - $50 -$10 + $1 = $1 gain
 
Quote from Eliot Hosewater:

Also, did you read the file Dr Joe posted in his new Yahoo group? It's an old paper on selling puts, then doubling down if you get assigned by selling CCs and more puts. I think they do it up to 4x. [/B]
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BTW, that was directed at HoCo who seems to have abandoned his thread.
 
Quote from Dolemite:

Along the same lines as the original post, I found this book to be a pretty sound strategy if you are looking to sell premium and reduce risk:

Put Options : How to Use This Powerful Financial Tool for Profit & Protection

It was written by Jeff Cohen and it has been a while since I read it but I believe he actually actively trades the strategy. The key is hedging with index options to try and reduce exposure.
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Do you actually trade on Cohen's strategy? I read the book about 5 years ago but got sidetracked and never implemented it. Also, I can't seem to find anything current about him on the Web.
 
Quote from Eliot Hosewater:

BTW, that was directed at HoCo who seems to have abandoned his thread.
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Not abandoned, just in read mode learning all I can. Dr. Joe's post is what inspired me to ask those with wider experience.
 
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