Finding the sweet spot in options trading with covered calls requires both strategy and adaptability. Let’s dive deep into how you can generate income while maximizing your portfolio.
Do you ever do poor man's covered calls? They require far less capital, but I keep a significant amount of dry powder for each trade. If the stock goes to zero, I'd only lose the amount of the trade which is a fraction of the cost of 100 shares. They are also best for low implied volatility environments which balances for cash secured puts for high implied volatility.
I consider closing cc of up 75% especially if in middle of duration. If near expiry I just let it expire. Normally I am doing 60-90 cc. My strike in general is at least 3% higher and premium of 3%. I do when stocks are at or nearing my price target and the story hasn’t changed. Obviously with market at highs I have more than normal cc. YTD I have $29k in premium. Only a few called. Mostly I close for profit, rinse and repeat.
Do you ever do poor man's covered calls? They require far less capital, but I keep a significant amount of dry powder for each trade. If the stock goes to zero, I'd only lose the amount of the trade which is a fraction of the cost of 100 shares. They are also best for low implied volatility environments which balances for cash secured puts for high implied volatility.
I have written about PMCC here in the past, I personally do not do them but I think it is good strategy to pursue.
Thank you, Edward. I value your opinion because you have more experience than me and I’m always trying to learn more.
I consider closing cc of up 75% especially if in middle of duration. If near expiry I just let it expire. Normally I am doing 60-90 cc. My strike in general is at least 3% higher and premium of 3%. I do when stocks are at or nearing my price target and the story hasn’t changed. Obviously with market at highs I have more than normal cc. YTD I have $29k in premium. Only a few called. Mostly I close for profit, rinse and repeat.
Yes thats a good system.