Keen newbie trading covered calls - Aussie Stock Forums

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  1. #1

    Default Keen newbie trading covered calls

    Hi Everyone,

    Pretty glad I found this forum.

    I'm currently trading short on covered calls on the ASX only. Managing 2-3% Per month on my equity. I would like to up the anti and hop over to the US market.

    I just signed up with Interactive brokers.

    Is there anyone here that is trading this strategy on the US market and hitting these return's on a one month contract? ID love to hear from you.

    Moderator - Feel free to re direct me to a related chat!

    Here is to financial education and financial freedom!


  2. #2

    Default Re: Keen newbie trading covered calls

    Most recently: http://www.aussiestockforums.com/for...ad.php?t=29775


    Quote Originally Posted by wayneL View Post
    x% per month return is totally the wrong way to look at covered calls. If it were that easy, the gurus would just systematically write CCs and be done with it.

    They don't.

    Let's look at this a different way.

    Supposing you own a basket of shares; you have two choices, just hold the share or systematically write calls over them.

    Which is going to perform better?

    In a rampant bull market, the CC strategy will underperform, just holding the shares will do better.

    In a stagnant or bear market, the CC strategy will outperform the straight out share portfolio. You might not make a profit, but you will lose less.

    ...but in certain circumstances, the CC strategy will work against you over a series of trades no matter what the market is doing overall.

    "Insurance" changes the structure of the returns because of how it affect the Greeks. A covered call with put insurance is simply a synthetic bull vertical spread, AKA a "collar".

    This strategy has its uses and is a good one in the right circumstances, but it is no Holy Grail, despite what the seminar clowns say.

    ...and please do not use the term "share renting". It is inaccurate and misrepresentative of the mechanics of the strategy.

    Anytime you hear someone waxing lyrical about "share renting", think to yourself - "muppet".
    How about this classic: http://www.aussiestockforums.com/for...ead.php?t=1042

    Feel reality crumbling around you? Don't know what to grab hold of anymore? wayneL got you covered again here: http://www.aussiestockforums.com/for...ead.php?t=2023

    and so on.

    Just google "covered call wayneL" for the full breakdown


    My quick 2c is that writing options (in general) seems to be a good bet when volatility is high and declining, can take advantage of volatility clustering, etc. But writing options when vols are low and could spike is asking for trouble.
    Disclosure: Long cash, gold, stocks.

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