Writing ITM Covered Calls

Arnie Guitar

Arnie Guitar

For the longest time, I've wanted to do this, attracted by some downside protection while banking the time premium.

My underlying was OXY.

I had a mix of expirations and some ITM and some OTM.

Man, I had a bunch of ITM OXY Calls expiring Friday and I just didn't know what to do.
I understand rolling up calls, but the math, and the huge runup on Friday kinda paralyzed me...

Dang it.

OXY just blew through several strikes, and I'm ITM on several more expiring in the weeks ahead. OXY's runup was so huge that I'm thinking some profit taking is due...but I'm not so sure.

I think I've been writing too close, I need to write farther out, and mix in some OTM positions.
 
Whichever strikes you choose, you’ll always be too close or too far.
Over the long run, selling covered calls is known to produce the same results as just holding the stock directly.
 
Do you think oil will dip in the not so distant future? Roll, if you think you will get fucked only harder, close. At this Point all you've got is hope against humanity->no vaccine->2nd lockdown by November. But then again, whos to say the FED can't blow through a couple Trillions more.
 
I never liked selling calls without also selling puts but that's the neutral, mean reversion, max theta burn guy in me talking. For example if I was holding 200 shares I'd rather sell 1 call and 1 put than just sell 2 calls. Ideally I'd sell 2 on both sides but everyone option seller finds their niche.
 
ET180 said:
Simple. Sell puts at the same strikes that will get called away. If you don't eventually get assigned, you're still guaranteed to make a profit. That's a good problem to have.
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May I post my position and ask you to give me an example of what you're talking about?

06/05/2020 Bought 200 OXY @ 18.59
06/05/2020 Sold 2 OXY Jun 12 2020 18.5 Call @ 0.93

OXY is currently @ 20.79

So sell the 18.5 Put with the same expiration date?

Thank you.
 
guru said:
Whichever strikes you choose, you’ll always be too close or too far.
Over the long run, selling covered calls is known to produce the same results as just holding the stock directly.
More...
Or slightly worse in absolute sense.
 
Arnie Guitar said:
May I post my position and ask you to give me an example of what you're talking about?

06/05/2020 Bought 200 OXY @ 18.59
06/05/2020 Sold 2 OXY Jun 12 2020 18.5 Call @ 0.93

OXY is currently @ 20.79

So sell the 18.5 Put with the same expiration date?

Thank you.
More...
Your position is equivalent to short a naked put and a naked call.

If you short another naked put, what happen if OXY goes back down to below $18.89 by expiration?

Depending on your opinion on OXY, sometimes the best strategy is simply close it out and call it a day.
 
Arnie Guitar said:
May I post my position and ask you to give me an example of what you're talking about?

06/05/2020 Bought 200 OXY @ 18.59
06/05/2020 Sold 2 OXY Jun 12 2020 18.5 Call @ 0.93

OXY is currently @ 20.79

So sell the 18.5 Put with the same expiration date?

Thank you.
More...

Yes. Although, normally, I'd sell 2 of the July or even August 18.5 puts. I started out doing weekly options, but I have migrated more towards longer duration. Especially if you are of the opinion that volatility will continue to come down over the next two months (I'm not necessarily sure that it will). The last time I traded OXY, it was in the 50s or 60s. It really fell a lot. That might be a good buy and hold candidate.
 
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