How to Trade Covered Calls Properly (The 3 keys to Uncommon Profits)
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- เผยแพร่เมื่อ 11 ต.ค. 2023
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Better way is to trade it on a weekly basis. Pick a strike price that is about 10 to 20% above yours and if the stock moves up through it. Just buy back the expiring option and then sell the next week at roughly the same price....AND You're get out, or strike price will be 10% higher than before! I've done this for years and it works. Especially on NVDA lately.
Smart. This is how it’s done
What do you mean when you say sell the next week at roughly the same price? Would you mind explaining this a bit more?
@@friedbeefjerky he means, if you sell a call, and you lose money on it bc the value o the stock goes up, then you "roll" your option. which means buy back your call at a loss, then sell a new call at 10 percent higher that expires in a week, and hope you get your money back
@@10010x0x0x01101XX0X1 when do you decide to roll when it’s above the strike price? Look at the momentum and news and make a gut call?
@@10010x0x0x01101XX0X1 Right on. Another way is to closely monitor your stock price. I set up ALERTS to notify me if the stock is getting close to the short strike. I like to roll up and out actually.... and before it penetrates the short strike.
Thanks! I'm new to options but your method of explanation is spot on !!
Great info as usual, but I wish more often SMB would cover what to do when these trades move against you...especially if it moves a lot against you.
Yeah, but that like, hardly ever happens. : )
Agreed. I've gotten hit with pretty substantial floating losses from market downturns -- several times over the last year or two. It's knocked me down below PDT and I've been stuck, unable to trade because of it...all because I didn't have the appropriate safeguards in place. I've always heard covered calls referred to as relatively safe -- I'd like to learn how to handle this scenario.
@@elroyblackbean Good question. My take on Covered Calls is that it's a way to skim a little extra income from the stocks you hold for longer term investment (not trading). A good rule of thumb is to sell 15 Delta. You are not going to get a ton of premium, but the main objective is to hold the stock until it hits an intrinsic value where you want to sell it. In the interim tho, I pick up some extra income while watching the stock go up to my intrinsic value target. Also, since I do this for long term holding stocks, I am not overly concerned about the temporary ups and downs of the market. I do this only on very financially solid companies (stocks) that I want to own for a long term. If you are losing your ass on the actual stock price of the stock, then look for more financially sound companies to sell Covered Calls on (AAPL, AMZN, MSFT, GOOGL or ETFs like SPY or VOO or QQQ). I don't look at selling Covered Calls really as a "trade" move. It's just a means to pick up a few extra bucks in premium while I enjoy the longer journey of watching my mega stock appreciate in value. There is a danger too that with some of these stocks, they are considered "growth" so it's feaible that they could rise so fast as to blow through your short strike on you Covered Call. I watch mine daily, and don't heistate to roll them UP AND OUT if the short strike is being tested....assuming I want to continue holding my stock by preventing it from being called away. You can also use technical analysis and sell Covered Calls only when they are at a clearly defined Support. No guarantees that it won't keep going up, but at least you are dealing with probability. btw.. this is why i use 15 Delta. It's a pretty conservative Delta to choose a strike that most likely wont be tested. Don't expect to get rich off the premium on these 15 Delta option contracts, but in the long run you will pick up some xtra cash along the way. As always, there's more that one way to skin a cat, so do what you feel is best for you.
One more point. Leading up to earnings, the IV will soar followed by an IV Crush. You can sell a lot more premium during this time, if you can live with the possibility of a big move UP in the stock value. Be careful there so you don't endure an opportunity cost by getting your stock called away (assuming you still want to keep the stock for the long term). A little more that One standard deviation is pretty conservative. TSLA will drive you crazy if you try this.. LOL....and thats why I only "Trade" TSLA using other strategies.
Why didn’t he have the stock called away at 180? (He’d have the Apple stock called away at that time , wouldn’t he?
Always remember that when you sell, you can be assigned at any time (called American Options). We tend to assume you can only get assigned at expiration (European Options). Also, always calculate the value of dividends into your decision to stay in a trade. A buyer may still assign you even if it costs them more because the stock's dividends compensate for the extra cost. Ask me how i know.
I always wonder what is the probability of the buyer of the option exercise it before the expiration date (American execution).
@@ramses4321 Random. I just got early assigned today.
Dividend and also prevailing interest rate when the extrinsic value becomes insignificant. The number one reason for early assignment is lack of extrinsic value.
I bet you know the hard way.
Amazing explanation. Super simple to understand, thanks!
Glad it was helpful!
Very clear guys, keep up the good job! 👍
Excellent video on Covered Call - especially on Synthetic Covered Call - thank you
11:28
that was new to me thanks.
Great advice... can use credit call spreads for the same purpose too
Great video. Thank you for sharing!!!
Holy shit i didnt realize i could close out a call and sell more calls such a good way to play volatility
Sweet video guys as you really show investors the benefit of having a covered call strategy instead of just sitting around collecting dividends. Any investor who doesn't want to learn how to do this is an absolute idiot!!!
There is a glaring error in your 2nd example as the call sold short should be bought back at a loss to close the transaction since it expired IN THE MONEY (debit from buy back March 150 calls with stock price at $154.34)! Your math of $4770 profit for the calls sold would be ultimately reduced by the cost of buying back the same calls in the money at expiration.
This bothered me too. I think the buyer of the calls would have to pay $15,000 each to exercise them. To supply the required 1000 shares (10 contracts) at 154.34, the seller would have to buy them for $154,340, which is a $4340 loss. So if I understand correctly the actual profit would be $26,110, not $30,450. Let me know if that makes sense.
In the example, there is no exercising of the options. The trader simply sells the long July 100 calls and should in theory, buy back the March 150 calls since it expired in the money at $154.34 to close out the transaction. The March 150 calls were sold for $4770; representing a profit. However, whatever the price is at expiration, which would be higher, represents the loss from the covered call campaign. This is the missing piece from the example. They did get $4770 credit from selling the March 150 calls originally, but there should also be a debit of $XXXX.XX for buying back at expiration to give us a true picture of the P&L. So the entire example is lacking.
Just got into this! Thank you so much. Here comes the money!
careful my friend
Some years ago you posted a video about converting an equity trading system to using vertical spreads. Do you have a link for it?
Best on stocks you really want to own and hold.
It's easy to look back and see how you could have had different results. Woulda coulda shoulda.
True , wish I had done that last October to Dec with TLT!
My second comment is again about the 2nd method. When the FNV is at $147, it would be safer to sell the March calls a little further out, maybe at 160 or 170 even, instead of 150. This would've prevented the loss when it hit 154 strike at expiration. Also, the loss of the in the money expiration was missing in the calcs at 16:38 minutes, resulting much less gain. Also, this example was very idealistic. If the stock goes to $110, what would happen to the $29k we invested in calls vs the profit we gain from selling out of money calls? I think a study on a strategy should cover all senarios, or not be presented as a profitable one. Otherwise, we could just buy naked calls, invest only few hundred bucks and present a big profit since the stock rallied in our favor. Not trying to be negative but learn and be more realistic.
Same question I had, what if FNV tanked and stayed down until expiration of the calls bought. Knowing how to deal with that scenario would also be helpful.
@@stanmanmedia they don't read or respond. They are just advertising I guess.
@@stanmanmediaYou always need a stop loss on any trade. And don’t violate it.
Do you provide offline classes for options trading
I appreciate your approach to teaching.. To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough, we just need to hold onto our hopes and wait to see how things turn out because market movements are almost always unpredictable. In my portfolio, I'm noticing more red than green.
As with an my big financial decision, it’s important to keep your guard’s up for economic risks. However, smart planning, time management and seeking advise from a financial adviser can help keep you and your money safe
Yes i agree and right now the markets are going berserk right now. This is the best time to watch them, get to know them better, and strike when the opportunity presents itself. I learned that from my mentor
Mind if I ask you to recommend how to reach this particular coach you using their service? Seems you've figured it all out unlike the rest of us.
Sure, the Investment advisor that guides me is '''Natalie Noel Burns
'and she's renowned and has quite a following. So it shouldn't be a hassle finding her. Just look her up.
Natalie Noel Burns is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Thank.!🎉
Nice news they make me optimistic on the markets and I'm longing them.
Эта связка - настоящий секрет успеха, я доволен, что нашел её.
Assuming you can time the dips and recoveries its an excellent plan. 😮
Put an order out for price you want to buy it back at that doesn't expire and it will buy back automatically for you
Is the first strategy conflicting with the third strategy?
The trick to selling options is simply knowing the Friday closing price. How hard can that be?
*Knowing the odds of the strikeprice you've sold.
The problem I ran into with the synthetic covered call is random assignments. How does the random assignment happen and how to avoid it?
Thank you Seth for the video. About 0 dte options in SPY/QQQ. Do you know if settlement will be with the closing price at 4.00.00p.m. E.T. ?
I trade IWM more, but to my knowledge, non-Friday options die at 4:00 PM. Friday options have a 90 minute after-market risk of price changes counting after the option market closes. Always close out Friday expirations if they are close to the money.
Thank you!! but do you know if settlement will be with the closing price? Can I get assigned after 4.00PM if the market moves after closing? So the rules are different on fridays? @@Kanjicafe
I want to understand something. If you sell a covered call & then buy it back does that break your obligation to sell your shares at the strike price-if it were to reach the strike price-as you are now the holder of the option contract?
what is the worst case scenario losses for a synthetic covered call?
worse case scenario is that the underlying price falls below your deep in the money call, so you lose 100% of what you bought the long call for. the deeper in the money you go, the more protected you are from 100% loss.
If you keep your position for half the time do you generally only get half the premium
In a Portfolio Margin, even if we have a protective put, then the Covered Calls require lots of collateral. Any way to minimize the collateral? Is it related to delta possibly?
Something that I am a little confused on. If the stock price reaches or exceeds the strike price before expiry the option holder has the right to exercise that option. Correct?
May I have a question - PMCC = synthetic call - if the underlying price goes above the short call strike - at which level would you close or roll it out? 100% "loss" on short call price or more (e.g. credit 100, current loss 100) ?
That is a question for tom sosnof
Since the Delta of the long side will be higher than the Delta of the short side, the increase in cost to buy back the short side will be less than the increase in value of the long side. So you can just sell your long side, buy back your short side, take the profit. Then start over.
@@Kanjicafe Yes, that is clear, the question is WHEN to buyback the short - interested in their approach
Don't get me wrong, I think this is great info and appreciate it, but what if you don't have the +$25k sitting around to get into the first option call to begin with? 😅
Thank you so much for your video, you opened a door for me to earn some passive income in my retirement. I have one question about selling cover call. If I sell a cover call at $10 which expire at the end of next month, from now and the end of the month, if the price goes higher than $10 in the middle of the contract, will my shares be called away on that date or at the end of the month?
They could be called away mid-month, but they usually are not. The main reason a person might call your shares is if the stock is about to go ex-dividend and they want to pick up the dividend. Otherwise, there is no incentive to spend his money on buying your shares until the end of the month.
This is a great trade. What is the original cost of Trade for the 300 shares please? What prompts the trader to sell 3 covered calls @ 170 strike? Cost of ownership determines the strike isn't it? Please clarify. Thanks.
Thanks for the video. Does the 2nd methos of synthetic covered call allow trader to not have $127000 capital? In order words, yes we use less capital to do this trade, but the broker sees the "in the money calls" that we bought expring in 6 month as the coverage for the next month calls we sell? I'm not sure, but I think you need to have $127k + 29k(cost of buying calls) in your account to trade this method even if you are not using that capital. My reason is, if everything goes against you, you could lose on your sold calls one month ahead if the stock closes at $151, and then comes down to $99 on July's expiration. Where is the coverage in broker's eyes? Correct me if I am wrong.
My second comment is again about the 2nd method. When the FNV is at $147, it would be safer to sell the March calls a little further out, maybe at 160 or 170 even, instead of 150. This would've prevented the loss when it hit 154 strike at expiration. Also, the loss of the in the money expiration was missing in the calcs at 16:38 minutes, resulting much less gain. Also, this example was very idealistic. If the stock goes to $110, what would happen to the $29k we invested in calls vs the profit we gain from selling out of money calls? I think a study on a strategy should cover all senarios, or not be presented as a profitable one. Otherwise, we could just buy naked calls, inest only few hundred bucks and present a big profit since the stock rallied in our favor. Not trying to be negative but learn and be more realistic.
remember to calculate commissions and taxes from the overall profits.
Great video!! Thanks. Question, I've traded covered calls before but never synthetic covered calls. Where I get a bad feeling in my stomach is when I play around and "buy" options on a theory I have on the direction or trading range of a stock. So in the example given on the synthetic covered call on the gold mining stock, what if the trader's theory was wrong and the stock went down significantly in while he held those costly deep in the money calls that he bought? I believe that could result in significant loss on that strategy but I may not be seeing all the possibilities on recovering, even if the stock fell precipitously while he held the deep in the money call option until expiration let's say. How would one recover with little damage if the thesis was wrong and he held costly calls while the stock fell like a rock and stayed down? Thanks very much for clearing this up for me because I'm a bit afraid of the synthetic covered call and maybe I shouldn't be.
No, you should be a bit afraid of synthetic-covered calls. Options are NOT a storehouse for value and yes if your positions decrease significantly without recovering you will wine-up with a significant loss. You could roll your credit down to capture more premium however this can induce more risk. The best stance is to take your losses and move on. Remember greater potential for gain also increases your RISK. DITM strategies are not bad if you can control your emotions and have the ability to monitor your account daily (in other words, you are a trader, remember these videos are geared toward people who are option traders and those who would like to become option traders). If not hire a trader (who's willing to "run money") to do this for you.
@@AntonRah great message, yes.. I think these guys should talk about the downside risk if the thesis is wrong!!! Haha
@@stanmanmedia agreed. However you've got to understand that this is a corporate channel. They are speaking to potential clients. They do a very good job of presenting the information for marketing purposes. There are whole courses on risk management that I'm sure you'd get into if you were to get more involved ($$) with their training.
@@AntonRah Totally understand that. They are excellent too!!!
When you do the synthetic covered call you want to buy 1) deep in the money and 2) far far from expiration (for me that's usually two years out or more). Two things happen at that magic place. 1) Δ delta is close or at 1, so the price change in the call is in near perfect synch with the underlying and 2) Θ theta is close to 0, so the time value decay is insignificant. This gives you a long time to be right on direction, and a long time to capture Θ theta in the opposite direction on the near expiration short calls, and allows you to pick lower Δ deltas on the short side and still overcompensate on the Θ theta decay. As time passes and you write more and short calls against the long call, you keep amassing short call premium, and your need to be correct on the direction in order to make a positive return becomes less and less critical.
wow I just do a sell on the %ups after I pick a low delta (
In the first example, if you were to buy Apple shares at $171 and sold ITM covered calls at $170, wouldn’t the shares you bought at $171 be called away from you immediately?
No, the call buyer has the right to buy them but not the obligation when then go in the money. Most of the time the buyer of the call will just sell the call because the call is worth more money than exercising the option. For example, you sell the $170 option for say $2.00. If that person exercises it, he loses the $2.00 he spent to get the option and gains $1.00 ( $171-170) on exercising the option. He has a $1.00 loss.
Great video, Thank you! Aren't you suggesting selling covered calls with a very high delta, which might work in a bearish market? But at what point do you close the position when the price reverses? Let's say you still have 20 DTE and the stock price is ITM now. Do you run the risk of the option buyer exercising his/her long call? Or does that happen only on the day of expiration?
You can get assigned early. I was just assigned on a stock on Thursday AM before the market opened. I intended to roll it that day. I was not happy because it was deep in the money, now I hold 400 shares. Since it is deep in the money, I have to sell calls 3-4 weeks out to get a decent premium. Next time I'll roll a few days earlier.
@@FBAHSY Thanks! This helps. That's what I read on other forums too. You were selling puts, I assume. In my case, I don't want to sell my shares for 2 reasons. 1. I intend to hold them long-term. 2. The capital gains that you incur, esp when you are sitting on profits. Personally, It's better to sell way OTM calls for a lower premium.
@@raghavanprabhu In my example, I was selling puts but I sell naked and covered calls too. I have had shares called away from, but there were no capital gains because I'm trading frequently so they count as regular income. You will have to sell OTM covered calls and watch to make sure they don't go in the money. If they go in the money then you need to roll them. Watch for earnings, the price could shoot up on that day past your strike. Generally, people don't exercise the shares early unless the shares are near the ex-dividend date and they want to collect the dividend. Good luck!
When your short calls are ITM, if the option price plus the strike price is greater than the stock price by say 10 or 15 cents, you are unlikely to get exercised (except sometimes when the stock is going ex-div). If there is very little time value left in the short option then it's time to manage the position.
For American style options, yes. Euro options can only be assigned at expiration, but you can buy/sell the option early. I was surprised to be assigned the very next day an ITM put, so it does happen.
Seems like you need a crazy amount of money or margin. As a new trader will they let you do any of this? Seems like there would be a big catch or everyone would be doing this
I sell puts for credits but my question is if I roll out an option say for 2 months and collect $500 worth of credits if I decide to get assigned at $50 are my credits of 500 applied to the assignment price of $50 so is my cost average $45?
I watch alot of content related to options and no one has ever mentioned what happens when assigned after collecting credits.
What would happen if a call you sold using a synthetic covered call gets called away before expiration? will they execute the leap call I bought ? what are the cons
Had the same question. Do they automatically execute the leap? Do I have to have extra cash to buy shares on both the call I sold and the leap I bought? The net would still be positive, but if I suddenly have to have enough cash to buy shares on both sides of the trade, I’m in trouble.
Two short answers... (1) If you have 100 shares of stock already in your portfolio, then those will be sold along with a debit incurred for the assignment. If not, and you only have the LONG (Buy/LEAPS) Call, when your SHORT (Sell) Call gets assigned, (2) you will be debited "x" amount for buying back your SHORT Call, and your broker will simultaneously exercise LONG (Buy/LEAPS) Call at the closing price of stock the day your SHORT (Sell) Call got assigned for credits.
Additional information (you may skip reading this as I got long winded)... Depending on how deep ITM you placed your LONG (Buy/LEAPS) Call and how far your DTE is on this LONG (Buy/LEAPS) Call VS. how much debit you had to pay for buying back your SHORT (Sell) Call, and how far above your strike price is for this SHORT (Sell) Call when you first started this Synthetic Covered Call can result in a plethora of scenarios. (1) Substantial loss (shallow ITM instead of deep ITM LONG Call with close/tight SHORT call vs far OTM SHORT Call strike, and shorter DTE vs longer DTE with respect to the SHORT Call [30-day, vs 60-day, vs 90-day]). (2) May break even (again "may). (3) If lucky with everything falling into place just correctly, a satisfactory gain (from a deep ITM LONG Call [capital intensive], with a very far/high strike on your SHORT Call [Low Premium to offset debit paid on the LONG Call], and a good enough time has passed that the SHORT Call's value has decayed thru Theta albeit assigned for debit, but the LONG Call had grown in value to offset any debit on the entire transaction of assignment related to the SHORT Call whilst exercised on the LONG at the end of the trading day).
The second example of a synthetic covered call loses another 4k profit to close out buying back the 10 March 150 calls at an intrinsic value of $4. That profit is 26k not $30k. Also, buying the July 100 call at the bottom of the range would not be as profitable if FNV was trading at just below 150 instead. That huge profit disappears due to Theta later on and you are not paying 29k but 70k or more.
Are synthetic covered calls the same as "poor man's covered calls"?
yes
@@knproductions5290 I was wondering about that, too. Thank you.
Nice Shirt. India cotton? Vietnam?
Someone please get back to me on this. I e. Stock goes to 180 ,the buyer of the 170 should be able to. Buy the stock at 170 and sell it at 180 right ?????
Yes.
I know CC ETFs do this all the time so I must be missing something.
- first example, CC sold @ 170 strike for $11.43. APPL then rallies to $180 but if it goes another ~$1.50 higher those calls get assigned. Oops.
No mention of that.
I’ve then pocketed the 11.43 but sold the shares for $170. Now I’m even with what I’d have made just hanging on to the shares which is fine but to continue on with the plan I have to buy the shares back or the whole sequence dies & I also have tax on the full capital gain. Maybe ok if I’m a pure trader I guess but if I’m just adding some points to my yield maybe not so great.
Seems to me at the very least the math is a little wonky.
Clarity ! Short call options CANNOT be assigned any time !! There are 2critical events before any option contract can be called away! Those 2 critical events are the strike price and expiration! Superior to expiration is the strike !!!!!! No option can be called away / assigned unless it has met the strike and expired! An option can be owner exercised provided it met the strike at any time
Easy Wheeler market go down, but what happen if market go up ???
If you only have $7000 to start ( my Roth) what stock would you try to get to start this process?
A stock that costs $70 per share
The stock price is less than $70 , but remember to never risk on a small cap companies, always look for a large or mega cap to be on the safer side.
@@vishaltare952 what do you think of OXY?
SLV
Can you lose more than your initial investment?
Also, what will be the impact on the Dividend payouts? In your example Apple is a dividend paying stock, will the broker adjust dividend payable from the credit you have collected. Please help to clarify. Many thanks.
I just need to hire someone to do this for me
These are very valuable rules for anybody who wants to get rich. Unfortunately, most people who will watch this video will not really be able to apply the principles. We may not want to admit, but as Warren Buffett once said, investing is like any other profession-- it requires a certain level of expertise. No surprise that some people are losing a lot of money in the bear market, while others are making hundreds of thousands in profit. I just don't know how they do it. I have about $109k now to put in the market.
Understanding personal finances and investing will most likely lead to greater financial independence. By being knowledgeable about money and investing, individuals can make informed decisions about how to save, spend, and invest their money. I know someone who made over $350k in this recession influenced market, but to the best of my knowledge, it was through a financial advisor.
True, A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far.
Mind if I ask you to recommend how to reach this particular coach you using their service? Seems you've figured it all out unlike the rest of us.
Cant reveal much info, Catherine Morrison Evans is the shrewd advisor responsible for my portfolio success, it's only right you look her up and confirm yourself.
I just checked her out and I have sent her an email. I hope she gets back to me soon.
@1:29 Where is the video? Not that I need to watch it. It just doesn't appear.
th-cam.com/video/w_BjFmbwbYA/w-d-xo.htmlfeature=shared
Anyone can look like a genius looking in a rears.
@smbcapital I don't think we're seeing the cost of buying back the March 150 calls that were ITM, in the screen at16:30?
Well spotted. Also no account is made of selling covered calls against the stock, which you would expect to do. Still enhanced profits of course.
@Lakenheathdog & @howardlewis3405 There is no cost since the short options were allowed to expire and the trade was closed. (maybe some transaction fees, or you could compare it to an uncovered trade with only long options or stock and the "cost" would be giving up the $4.60 difference between the short strike and the closing price that day, assuming a compared uncovered position were closed on the same day for comparison's sake)
Thanks for highlighting. That’s a profound error on their part as the short call is well in the money and will have to be bought back at a loss thus affecting the P&L. It’s seems just the opposite of what he is saying.
They don't show it, but it likely would still result in an overall profit, but less than they're showing here.
Making money is not the same as keeping it there is a reason why investments aren't well taught in schools, the examples you gave are well stationed, the market crisis gave me my first millions, people shy away from hard times, I embrace them.. well at least my advisor does lol
This is superb! Information, as a noob it gets quite difficult to handle all of this and staying informed is a major cause, how do you go about this are you a pro investor?
Not at all, having monitored edge my portfolio performance which has made a jaw dropping $473k from just the past two quarters alone, I have learned why experienced traders make enormous returns from the seemingly unknown market. I must say it's the boldest decision I've taken since recently.
@@TheresaAnderson-kf5xw I've been thinking about going that route. I have a lot of stocks that I have maintained, but they are beginning to lose value, so I'm not sure if I should hold onto them or sell them. I feel hiring your investment coach would make it easier to restructure my portfolio.
Sure, the Financial advisor that guides me is *Mary Onita Wier* and she is renowned and has quite a following. So it shouldn't be a hassle finding her. Just look her up.
Thank you for this tip , I must say, Mary appears to be quite knowledgeable. After coming across her online page, I thoroughly went through her resume, educational background, and qualifications, and I must say, it was quite impressive. I reached out to her, and I have booked a session with her.
Why wasn’t your 170 called away, when the stock reached 180 ?
If I remember - the buyer paid $11 premium for the option, he would still lose $1 exercising at 180
I have 250 solana
11 etherium
Its nice you're open about your mental illness.
whats stopping me from buying a few hundred shares, selling a covered call for 100 of my shares, but on 0DTE..stock at $10 i sell a $40 CC 0DTE thats never going to get hit, never goes near it, so i just pocket easy free premium & never have to sell my shares, its done on the day and after that day i can do it again or sell my shares, whatever.
3rd point is too idealistic. Because on hindsight, of cos it worked better than selling at the nearer strike price. At that point, selling at strike near to cost would be better as u can always do csp to generate more profit.
Nice to have a strategy that isn’t day trading for once
Yes, agreed.
Definitely helpful . . . . but realistic? They are using optimistic scenerios. Hindsight is not an honest way to represent these trades.
Why is nobody talking about the stock going from $171 to $141 (a $12K loss) while this trader tries to maximize his covered call profits? Is he really supposed to be that excited about his shares gapping down so he can hurry up and buy back his call in a couple weeks? Maybe I am missing something.
you're right. that's the main problem with selling covered calls .... 1, you can lose gains if the stock moves quickly - 2, you can lose value even though you're generating covered call income. for me, covered calls need to be ACTIVELY managed. if a trade is moving against you, roll it. if a stock is falling faster than you can make up in covered call income, get out of it.
One moment, in the 2nd approach, you don't mention that you have to buy back the July 150 calls which would have been (just over, but let's forget the .10-.20 extra) $4.50 which wipes out the credit you received when you fist sold the July 150 calls. Maybe you are including that in the 'profit' you show for the sale of the 100 calls, but you either forgot that or you should at least show that detail. Leaving out these kinds of details always make me wonder about the firm beyond the presentation...
Its misleading. You should have included the case where the underlying declines and where losses are posted.
In the Synthetic Covered Call, (generally known as the Poor Mans Covered Call), you are trying to beat the market. Also you will get margin Calls and you will not be able to sell further Calls because of these margin difficulties if the underlying declines in a substantial way. This is a trap for young players and it would be better if it were mapped out for them. Otherwise a good presentation.
As an investing enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?
Very true. Despite having no prior investing knowledge, I started investing before the pandemic and pulled in a profit of approximately $950k that same year. In reality, all I was doing was getting professional advice.
There are a lot of independent advisors you might look into. But i work with Margaret Johnson Arndt and I have been working together for nearly four years, and she is excellent. You could proceed with her if she satisfies your discretion. I endorse her.
I hope you don't throw your money at stocks/options and hope it sticks. Do some work and find a trusted advisor that will give you their time and not use you.
Not as easy as stated. First you better do cover calls on highly quality stocks. Cover calls are great income generator, however, if stock goes south on you drastically while holding cover calls, you will lose lots of money. Apple is good quality stocks to do cover calls because it doesn’t drop much and if it does it will come back up.
also, ETF's that tend to move sideways like SLV
@@knproductions5290 The sideways tend to have lower premiums for just that reason, but did you notice SLV now has Wednesday and Friday option expiry dates?
indices better than stocks for calls. More expirations to roll to. More price stability.
Then again, a very high beta stock can be very attractive when the VIX is up.
It's Dave Ramsey, lulz.
My broker wouldn’t let me advance to tier two options trading. So I can’t do any of these strategies. All my study of the past year is useless. I can’t do any of it.
You need to research another broker. Try TastyTrade.
you can do a basic covered call
@@knpstrr I can buy calls or puts. If I want to do a spread, I need to do on a low priced stock that I have cash to buy 100 shares. I can’t do 0dte iron butterfly like I want to do on spy. I will need to make good calls and be right and sell the right spots . I am looking at Tesla and Disney put tomorrow
Change brokers.
@@zzyyxx123 to who? Who will give me tier tow it three trading with only 2500 cash?
At approx 4:55 you say $5,334 for the $5,304 listed. The listed $5,304 is wrong, it is actually what was said, $5,334. Always check content thoroughly before accepting. peace
This is so misleading haha. Ideal market conditions without any indication of risk. And then the graphic at 17:33 trying to say that the return % is low for actually exercising when in reality the exercise cost shouldn't be lumped into the return because you could sell the day you bought. Not to mention the idea that you are encouraging people to do these synthetic covered calls without the funds to exercise which would assume that there would always be enough volume to sell your calls 0DTE.
Just be more upfront about these risks in videos like this
But aren't you locking up over $50,000 in capital since the calls are covered?
Poor man's covered call
So you gained $6,549 in cc premium but AAPL dropped from $171 to $129 @ Dec 31st, 2022. You actually lost approximately $6000. Why covered calls are good idea???
Think a little bit. Time is the answer.
if you're looking at it long term, you don't worry so much about the price of the underlying asset. it will rebound. with that said, depending on how active you're able to manage it, it'd be a good idea to get out of that particular stock once the covered call premium is less than what you're losing in underlying value.
Your synthetic is really a risky poor mans covered call. You get lots of leverage because your long call is only 180 days. Problem is it is so close the time value will be eaten away very quickly.
buy calls far enough in the money and far enough out in time to have a delta of at least .90 and a theta no more than -.01
I’ve lost too many great companies selling call options, only to buy them back at a price much higher. If you had done this strategy on Apple for the past 15, you’d miss out on a big run
This is terrible advice, completely ignoring the unrealized losses on the long stock. Lmao
Terrible advice from one of the most successful options desks in the world , usually they trade on shares that are very long term holds
This guy thinks you can predict stock prices
Thank you🙏🤍It would be great if you tell us in another video how to change a purchased CALL in money for a new period in order to continue making a covered CALL.