Hundreds of CC trades over the years and I am fine with stocks as that is what I used the vast majority of the time. Price swings create opportunities. There are a number of reasons and strategies behind CC selling. For some that don't want to lose shares, your idea is probably better. But when you have a watch list of a few dozen stocks of which there are always some that are ripe for premium collecting while on the upswing, getting assigned is not a big deal. If you are in love with your holdings then don't use CCs.
@@mjs28s The problem with single stocks is if it abruptly falls 20% in a week, there's no guarantee it will come back, no matter how good the company is. But the S&P 500 or Nasdaq will always come back. Always. So it's a lot easier to sleep at night.
One thing for sure. Write covered calls on those stock at the price you are ready to sell and write cash covered puts where you are comfortable to buy the stock.
Liquidity is key to selling options, in the example here with ABR the liquidity is horrid. The spread of 0.1 - 0.2 is way too wide, you will notice after a while :)
To optimize premiums, SELL CCs, only on strong green days (1-2%+ for blue chip stocks, 3-5%+ for volatile stocks) SELL CSPs, only on strong red days (inverse of above) Just sold HOOD puts today when down 3.2% ($16.5 strike), guaranteed 7% in 3 week time frame.
When I try to sell covered calls through my bank I'm often told my trades (1 contract on $10 to $28 stocks) won't cover the brokerage fee for selling the call. Do you discuss what the brokerage fees for selling calls might be, how to minimize them, and how they effect your yield?
Change to a different broker that doesn't charge commissions. You will likely send up with low fees, like $0.50 per contract or there about. Plus, sometimes, there are also the market makers that drop on a few pennies here and there.
Nice work. Love the video. As a small account here I love these " more realistic " at the time videos. Now just imagin if that account or platform you where on you could do fractional shares. Well with that reinvestment each week, wow that would add a quick
One of the best explanations I've seen! The only other issue is how to actually set it up on the specific broker that you are using ( TDA, Webull, ...etc)
Great video! Can you make a video on what do to when your covered calls get assigned? So you are obligated to sell your 100 shares at the strike price, making your premium and stock price increase profits... but then what? Buy 100 stocks again for repeat?
In the graph examples at the beginning of the video, you act like assignment can only happen at expiration, even for an example where the share price is ITM before expiration, but not AT expiration. If this happens can't you be subject to early assignment at any point the share price goes ITM?
I don't know if this is too rudimentary but it is fundamental. I didn't hear you say that you need to own 100 shares of a stock to sell a covered call contract. You do. So in your ABR example you would have to buy 100 shares at $12.28 or $1,228. You can now sell a covered call contract against that every week.
This is a great video on covered calls, but what if I get assigned and want to buy the shares back? Can I also sell a 'put' at a lower price far out of the money to get additional cash flow, but if I get assigned, buy a put at or near the current price to buy the shares back and hopefully still earn money with the cash received by the 'call' and the 'put'? I'm still not brave enough to do options yet.
I see a couple of flaws with this. First, i think the delta you're using is too aggressive. If we were to get a rate cut announcement then ABR would shoot up way past your strike in the short term. I dont think this is consistent with ABR also depending on price movement. Yes you can roll the covered call but that will take out alot of returns over a year. Second, you arent including option commissions fees which will eat into these returns. I like videos like this but there should be more details to make it more realistic.
Happy Tuesday Everybody! Make sure to leave your $0.02 in the comments! THANK YOU for watching! =)
Hello I sent you a message on the discord channel did you get it ?
@averagejoeincestor I’m having a problem connecting discord to the patron account can you please help
@averagejoeinvestor
Pro tip, stick to etfs and don't mess with individual stocks. Even sfrong companies share can make big swings for macro reasons
Agreed
Hundreds of CC trades over the years and I am fine with stocks as that is what I used the vast majority of the time.
Price swings create opportunities.
There are a number of reasons and strategies behind CC selling. For some that don't want to lose shares, your idea is probably better. But when you have a watch list of a few dozen stocks of which there are always some that are ripe for premium collecting while on the upswing, getting assigned is not a big deal. If you are in love with your holdings then don't use CCs.
@@mjs28s The problem with single stocks is if it abruptly falls 20% in a week, there's no guarantee it will come back, no matter how good the company is. But the S&P 500 or Nasdaq will always come back. Always. So it's a lot easier to sleep at night.
Exactly!
One thing for sure. Write covered calls on those stock at the price you are ready to sell and write cash covered puts where you are comfortable to buy the stock.
You took.the words out of my mouth !
exactly!
pro tip, sell covered calls and cash secured puts in your roth ira to avoid taxation
Liquidity is key to selling options, in the example here with ABR the liquidity is horrid. The spread of 0.1 - 0.2 is way too wide, you will notice after a while :)
Love the channel ❤is there a specific time to enter into the covered call option (mon market open) or up or down day ?? Thanks
Friday the first time, then you need to let them expire so Monday or buy it back on Friday before expiration and sell the new one.
To optimize premiums,
SELL CCs, only on strong green days (1-2%+ for blue chip stocks, 3-5%+ for volatile stocks)
SELL CSPs, only on strong red days (inverse of above)
Just sold HOOD puts today when down 3.2% ($16.5 strike), guaranteed 7% in 3 week time frame.
Do I have to purchase the stock before I can sell it with options
For these excellent beginner classes you should also include a link to your "what to do if your contract is assigned" :)
When I try to sell covered calls through my bank I'm often told my trades (1 contract on $10 to $28 stocks) won't cover the brokerage fee for selling the call. Do you discuss what the brokerage fees for selling calls might be, how to minimize them, and how they effect your yield?
The fee is like 68 cents per contract
Change to a different broker that doesn't charge commissions. You will likely send up with low fees, like $0.50 per contract or there about. Plus, sometimes, there are also the market makers that drop on a few pennies here and there.
Robinhood.
Don't use a bank for stocks, use a brokerage. Fidelity for example charges a fee of $0.65 per contract.
Nice work. Love the video. As a small account here I love these " more realistic " at the time videos. Now just imagin if that account or platform you where on you could do fractional shares. Well with that reinvestment each week, wow that would add a quick
Good strategy but I'd go with a lower delta to lessen the risk of assignments, especially if ex dividend is near.
One of the best explanations I've seen! The only other issue is how to actually set it up on the specific broker that you are using ( TDA, Webull, ...etc)
What app you are using for spreadsheet?
Thank you so much for your time and wisdom. After watching your video, I think I’m ready to give it a shot. 🎉🎉🎉
Great video can you explain selling puts next thanks
Sell at a strike and quantity you are willing and have the cash to buy.
Great video! Can you make a video on what do to when your covered calls get assigned? So you are obligated to sell your 100 shares at the strike price, making your premium and stock price increase profits... but then what? Buy 100 stocks again for repeat?
bid ask spread is still big, and lack of leverage, meaning you still need to buy 100 stocks first, why pick this strategy?
In the graph examples at the beginning of the video, you act like assignment can only happen at expiration, even for an example where the share price is ITM before expiration, but not AT expiration. If this happens can't you be subject to early assignment at any point the share price goes ITM?
Hmmm...I already own Arbor Realty. Quite a few shares as a matter of fact. I think it may be time to apply for options trading at Fidelity.
I don't know if this is too rudimentary but it is fundamental. I didn't hear you say that you need to own 100 shares of a stock to sell a covered call contract. You do. So in your ABR example you would have to buy 100 shares at $12.28 or $1,228. You can now sell a covered call contract against that every week.
He literally tells you this @10:04 as well as puts it on the screen.
Were you doing chores while the video was playing?
@@mjs28s LMAOOOOOO.
Thanks Joe. Nice one. Enjoyed it
This is a great video on covered calls, but what if I get assigned and want to buy the shares back? Can I also sell a 'put' at a lower price far out of the money to get additional cash flow, but if I get assigned, buy a put at or near the current price to buy the shares back and hopefully still earn money with the cash received by the 'call' and the 'put'? I'm still not brave enough to do options yet.
Thanks again. Your videos are great.
if we start the wheel by selling put and got assigned, we will never have the room for having capital appreciation?
Great job joe
Can you outline on how money is lost in this strategy?
Thanks Joe.
You can also sell covered calls on SERI and get in for a couple hundred dollars. Now to be fair you are not going to make alot, cash wise but....
I see a couple of flaws with this. First, i think the delta you're using is too aggressive. If we were to get a rate cut announcement then ABR would shoot up way past your strike in the short term. I dont think this is consistent with ABR also depending on price movement. Yes you can roll the covered call but that will take out alot of returns over a year.
Second, you arent including option commissions fees which will eat into these returns. I like videos like this but there should be more details to make it more realistic.
I really want to start using this strategy to generate more income,
Now i until how the cc etfs generated so much income with yeilds
The Average Joe Investor, This is great! Let's be friends and have fun together!