Covered Call Writing

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rightway's picture
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Joined: 2004-12-02

We have been employing this for some time now, and the performance has
led us to own companies that have held up real well in in the downturns
of late.  The May and June reviews with clients has generated a
new batch of referrals.  If you are not doing this, look into
it.  You buy high quality stocks, put a sell price in the mind of
the client along with an agreed upon ROR.  If the option expires,
write another and keep the premium. 

In a sideways market this strategy is quite fun.  One note- watch
the strike price on the calls you are writing...you can end up throwing
the dividind out to QID status.

NASD Newbie's picture
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Joined: 2005-08-01

What a shame that Put Trader is not around.  I'll bet he knows enough about option writing to write a book.

blarmston's picture
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Joined: 2005-02-26

What a shame that Put Trader is not around.  I'll bet he knows enough about option writing to write a book."
Good to see you back Put. You just couldnt stay away. You really are smart- setting up those dormant ID's, so when one gets shut down, you can start up with the reserve one...
"I'm not Put- I joined in August 2005!"
PATHETIC....

dude's picture
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Joined: 2005-11-15

Except Blarm....Put would never publicly claim to be a "newbie"....his ego would implode.

dude's picture
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Joined: 2005-11-15

But then again......NASD Newbie does have the appropriate capital letters in the appropriate places, maybe you're on to something.

NASD Newbie's picture
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Joined: 2005-08-01

rightway wrote:
We have been employing this for some time now, and the performance has led us to own companies that have held up real well in in the downturns of late.  The May and June reviews with clients has generated a new batch of referrals.  If you are not doing this, look into it.  You buy high quality stocks, put a sell price in the mind of the client along with an agreed upon ROR.  If the option expires, write another and keep the premium. 
Without getting into the details, what do you think is an ideal situation?  What's a stock you'd buy and what's the call you'd write?
Don't tell me why, or anything else right now.  Just the symbols if  you want.

Indyone's picture
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Joined: 2005-05-30

dude wrote:But then again......NASD Newbie does have the appropriate capital letters in the appropriate places, maybe you're on to something.
Oh yeah...it's him.

Indyone's picture
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Joined: 2005-05-30

NASD Newbie wrote:Without getting into the details, what do you think is an ideal situation?  What's a stock you'd buy and what's the call you'd write?
Don't tell me why, or anything else right now.  Just the symbols if  you want.
But Put...you just reminded us that this is illegal...

NASD Newbie's picture
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Joined: 2005-08-01

Indyone wrote:NASD Newbie wrote:Without getting into the details, what do you think is an ideal situation?  What's a stock you'd buy and what's the call you'd write?
Don't tell me why, or anything else right now.  Just the symbols if  you want.
But Put...you just reminded us that this is illegal...

Just seeing if anybody is bright enough to send me an email instead of posting it on the message board.

badmove?'s picture
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Joined: 2006-06-10

gm @ 27
gmhy(aug 27.5) @ 1.75
do the math, not bad
not a solicitation, strictly theoretical.

eddjones654's picture
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Joined: 2004-12-03

gee,
I wonder if the GPs at that funny little green company know what's being discussed here?

NASD Newbie's picture
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Joined: 2005-08-01

badmove? wrote:
gm @ 27
gmhy(aug 27.5) @ 1.75
do the math, not bad
not a solicitation, strictly theoretical.

Not bad if the stock goes to 27.50--but what about the doom and gloom side that suggests GM is likely to go bankrupt?  Not much downside protection.
Still, that's the right idea.  Stock goes up, you make money. Stock stays the same you make money.  Stock goes down, you make money unless it goes under 25.50.
If it does you'd lose more in the stock alone than you would in this position.
 

badmove?'s picture
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Joined: 2006-06-10

better than owning it naked...correct?
or marry it w/ the 25 puts..again strictly theoretical plus dividend

rightway's picture
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Joined: 2004-12-02

I like to find the top holdings of many of the large cap managers and
find common holdings.  Then I look for Premium+dividend+gain to
strike to = 6+% net. I typically write the 30 to 90 day calls and I
love when I get a fat premium on a strike close to the current
price.  When this occurs, many times I will break the trade up and
write calls only on a portion of the long holding right at the strike,
then I have room to buy out the position by writing another call later
if the stock runs up.  If the stock does not move, or drops, I am
laughing.  We just made a killing on these with JPM over the last
few months. 

Doesn't always work though!!!

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