tjlocke99

my money is on Chris as an aside Chris, do you think this after-market options activity is a rule designed to benefit large institutions and MMs?

Great response Chris. Thank you.

Chris, I know we had a similar discussion on a separate thread, but I am not sure why you are throwing out MSFT? I have started doing covered calls on it with the weeklies, and the first two weeks I have gotten around .24 credit for a slightly OTM call on Thurs for the weekly. This is a stock that doesn't move too much and is currently trading around $30. So let's say you can get around a $.45 credit on MSFT for the weekly strangle you would short. Considering the stock is almost 1/4 the price of GS in your example that equates to getting around $1.80 if you multiply the $.45 by 4! Yes you have the higher commissions but the credit is larger AND MSFT maybe less volatile.

Hello. I know Chris had a long thread on assignment, but I am still confused by a few things. Let's say you own an AAPL 665/670 12 Oct long vertical call spread. 12 Oct comes along and the stock closes at 664.95, and you decide to let the vertical expire worthless. At 4:10 PM the stock goes up to 671 in after hours training. You will get assigned on the short 670, but what happened with the 665 long you owned? What I have read about most brokers if the option is $.01 in the money they will auto-exercise it for you, but in this case the stock closed OTM. Additionally, let's say you have an account with $30k in it and you own10 of these verticals. How could you even purchase the 1000 shares? Thank you for your time!

Thanks Tyler. Interesting information. Does anyone know if IB or TOS has a similar screening capability? I have seen screeners on stocks but not on options like this.

I don't have access to old data, but on Thurs I think the premium was closer to .22 on a weekly that was around .30 OTM. .30 of around $30 is around 1%. This a stock that doesn't often have large moves. If you make 1.5% on it a week because it went up around $.50 than I think that is good. However perhaps you can check TOS thinkback. (you'd need the high low not the Thurs close).

Thanks Chris. I am thinking rather than a OTM put as a hedge maybe not going to deep ITM on the call and maybe looking at more of an 80 type delta far enough out that the theta is low. seems like cheaper insurance than the put.

Hmmm. There is no free lunch right Another alternative would just do a deep ITM call but not a 90+ delta. Maybe something more in the high 70 or low 80 delta range. Actually I like MSFT. Look at the returns. The commisions may kill it but the returns are not that different than AAPL if you are getting $5 a short call contract. A few more questions/comments: 1. You won't realize that $5 profit right because you roll it each Thurs. Aren't you only realizing like $3 to $4 of that short profit? 2. What is your plan if you do get a big first week drop? In this example let's say AAPL drops $40 in one week. Not that crazy with how its going lately. 3. Did you say you would ever roll the weekly short mid week to a lower strike? Thanks. Richard

Chris, Thank you for the information you shared. I don't get how you can calc for a 15% loss? If after week #1 AAPL drops $30 then what would you do? Would you roll the weekly mid-week? Would you exit once it drops the first $20? When would you consider re-entering, if at all? Thanks. Richard

Thank you Chris! Earnings and dividends both wreak havoc right? What do you do around dividend time? Is there ever a safe stock that won't decline 10% that you sell a reasonably priced call on? I think it is really tough to figure those out Walmart? However their calls don't pay well. Other than proper position sizing, what are some options when the stock takes a nosedive like you mention? Maybe purchase a deep OTM put or vertical to start with?

Currently the only covered call I am doing is on Microsoft (MSFT) for obvious reasons. What do you think about covered calls on precious metals like SLV or GLD. Even Silver Wheaton? Commodities? When you get a chance please do send me your filtering method. Thanks again! Richard

Tyler, Also, hopefully someone else can also comment on synthetic covered calls. They seem like an interesting variation because if the stock nose dives your losses are capped.

Fantastic example Tyler! Thank you. How do you typically find candidate trades like this? R

Thank you trhanson for this informative post. One question: I am not sure what you mean here? Why would you want the stock to get called away? If you have an example then I think that would help me. Thank you again for your time! Richard

Good morning. Does anyone have some resources they could recommend on covered calls and synthetic covered calls? Examples of questions I have are: 1. Is it better to sell slightly OTM calls or ATM calls? 2. Better to sell weeklies or monthlies and how far should/could the expiry be? 3. What to do around the ex-dividend date and earnings time? Thank you! Richard

I would love some feedback on this. I purchased an AAPL bullish diagonal and bull call spread about a month ago and despite the stock going up my positions did not increase as expected. In both trades I had an ITM long at a strike of around 630 and a OTM short around 680 with the stock was around 660. What happened was that the OTM short somehow increased in value just slightly less than the ITM long position (in absolute dollars) and thus my gains were minimal. What I started to notice recently just by looking at some option tables is that some strikes seem to have a "better price" than other strikes with the same expiry. Rather than describe this in detail I now realize that there are likely better diagonal and vertical positions I could enter if I am bullish or bearish on the stock that will be more profitable. However I am not exactly clear how best to analyze the trade that is the best value. Let me use AAPL (Apple computer) as an example. If I want to enter a bullish AAPL diagonal am I better off: 1. Buying a deep ITM call and selling an ATM nearer month call? 2. Buying a near ATM call and selling an OTM call? 3. Buying an ATM LEAP and selling an near ATM call. . . . There seem to be hundreds of possible combinations. Could someone help me or point me to a resource that would help me understand this better? One mistake I know to avoid is do not be short an ATM or near OTM call that expires just after an earnings announcement or major product launch. The IV increase will also eat into your profits even if the stock goes up. Another thing I know is deep OTM options lose most of their value PRIOR to the final 30-40 days before expiration. As far I know this NOT true of ATM or slightly ITM options which decay the most in the final 30 to 40 days. Therefore this leads me to believe that typically if the short in my vertical or diagonal is going to be around 2 months out, then I want it to be reasonably far OTM so that if the stock remains flat I can still breakeven or even make a small profit. Thank you VERY MUCH for reading this. Richard

Hi Eric. I've never heard of the term short float? Could you describe it? Thanks.

Thank you for the update Thaze.

Interesting points Thaze. Do you just figure out these investments through alot of research or is there a site you use that tips you off? I am thinking Apple after there 12 Sept event maybe another good candidate. The stock got hammered today. I remember it also dropping alot last Nov after the unimpressive iPhone 4S announcement. It maybe be good to pickup some bull call spreads if the stock takes a big dip after the event.

Bill this doesn't work. The value of the stock price goes down by the value of the dividend on the ex-dividend date. Richard

Kim, Looks like you have some good comments for your future advertisements Richard

Thanks Kim!

Kim, I couldn't find where this was posted on the site, but I have to tell you this is what makes you a real stand-up guy. I don't know anyone that would write such an honest e-mail. Well done Kim. Honestly you also don't have much to be sorry about. You discuss the risks up front. You have created an excellent community here. As long as I am able to afford it, I'll pay my monthly fee just for the chance to interact with some of the regular members on this site and you, regardless of the success of the earnings trades. I wish you continued success. Richard

Human minds love to find patterns. However TA seems to be adding a pattern to things that have already occurred and sometimes reading tea leaves. You can make a pattern out of anything in the past. However I don't think this tells us much about the future. I love Jeff Augen's discussions on this. He says once a strategy has hit a common broker tool,any alpha that was available from that strategy is now gone.

Thank you Artie? How did you generate this? Does this Mc. Oscillator use bollinger bands?