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Re: So much for ER in 2010... (longish)
Old 08-24-2006, 11:17 AM   #41
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Re: So much for ER in 2010... (longish)

Lena, www.radicalguides.com IS the online books on ETFs and bonds.

Maybe a new thread solely on covered calls is called for.
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Re: So much for ER in 2010... (longish)
Old 08-24-2006, 11:23 AM   #42
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Re: So much for ER in 2010... (longish)

I believe that most calls do not expire worthless. Many are bought back to close the position.

Suppose I sold a call that was 10% out of the money. If my stock is called, I get the 10% gain in the stock, plus the call premium. Yes, it is rare for a stock to gain 10% in a month and since it is rare, the money gained from selling the call would be minimal.

That's the dilemma with covered calls: If the premium you get by selling is worthwhile, then the likelihood of the stock being called away is high. If the premium you get by selling won't even pay the commission, then the likelihod of the stock being called away is low.

In the latter case, there are no buyers for such unlikely scenarios, so you couldn't sell such a call in the first place (the volume for many calls is zero).
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Re: So much for ER in 2010... (longish)
Old 08-24-2006, 11:25 AM   #43
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Re: So much for ER in 2010... (longish)

LOL!. Sorry, should have looked at the link first.

May be new thread is in order. I do feel bad for hijacking Peggy's thread

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Re: So much for ER in 2010... (longish)
Old 08-24-2006, 11:26 AM   #44
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Re: So much for ER in 2010... (longish)

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Originally Posted by brewer12345
I'm not a fan of the strategy because I am trying for home runs.* But bear in mind that most calls expire worthless.* Someone is raking in that dough.* If you are a more active trader you can play goames.* For example, stock X generally stays between 25 and 30.* So if I own it and it drifts up to 29.50, I might sell the 30 call that expires in a month knowing that in all likelihood the call will expire worthless.* If stock X pays a dividend n the meantime, so much the better.
I have heard of that strategy for covered calls. My reaction is... If you don't expect the stock to move up don't own it. A 1 percent payout just isn't enough for me.

LOL:

OK OK OK...

I didn't really mean to hijack this thread so I'll stop the covered call posts.
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Re: So much for ER in 2010... (longish)
Old 08-24-2006, 11:46 AM   #45
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Re: So much for ER in 2010... (longish)

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Originally Posted by Lena
Dude,

you gotta give people some credit.* They might surprise you.* Then again, may be not

Lena
I DO give them credit........ I am NOT questioning anyone's intelligence or resource on here, jsut pointing out that "convexity" is a ways beyond the basics of bond investing...............DURATION is something we all shoud know about...............

Kind of like "R-squared", or Sharpe Ratios on mutual funds........most people dont'care..............

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Re: So much for ER in 2010... (longish)
Old 08-24-2006, 11:50 AM   #46
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Re: So much for ER in 2010... (longish)

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Originally Posted by LOL!
I believe that most calls do not expire worthless.* *Many are bought back to close the position.

Suppose I sold a call that was 10% out of the money.* If my stock is called, I get the 10% gain in the stock, plus the call premium.* *Yes, it is rare for a stock to gain 10% in a month and since it is rare, the money gained from selling the call would be minimal.*

That's the dilemma with covered calls:* If the premium you get by selling is worthwhile, then the likelihood of the stock being called away is high.* If the premium you get by selling won't even pay the commission, then the likelihod of the stock being called away is low.*

In the latter case, there are no buyers for such unlikely scenarios, so you couldn't sell such a call in the first place (the volume for many calls is zero).
Good thoughts...............in the late 90's, the premiums were much HIGHER, so you could make some nice cash on covered calls. The spreads are much tighter now, so after transaction costs the net profit has fallen..........

Gotta give props to the option folks...........they know where the market's going before the traders on the floor.............
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Re: So much for ER in 2010... (longish)
Old 08-24-2006, 12:02 PM   #47
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Re: So much for ER in 2010... (longish)

Yep, you can look at the options that have high volume to see where the action is.
With high volume, both sides believe they are gonna make money. And 100% of the time, one side does.
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Re: SOX, bonds, etfs and covered calls
Old 08-24-2006, 04:40 PM   #48
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Re: SOX, bonds, etfs and covered calls

I split this discussion off from Peggy's questions about her investment situation.
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Re: SOX, bonds, etfs and covered calls
Old 08-24-2006, 04:51 PM   #49
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Re: SOX, bonds, etfs and covered calls

<thanks for the split >

Here is another way I have used covered calls:

Suppose I am thinking of selling my stock, but I am a little ambivalent about it.* Should I sell?* Should I hold?*

I just don't know what to do.* So a few times I have sold a covered call in that situation with a strike price acceptable to me.* I would not be upset if the stock got called away from me (at the higher strike price of course).

If the stock price goes up, I make a gain up to the strike price plus the call premium for being wishy-washy about it.

If the stock price stays about the same and the call expires, I have the gratification of having made a little money for being uncertain and I can repeat the exercise.

If the stock price drops, I have the consolation that the call premium diminished my losses.
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Re: SOX, bonds, etfs and covered calls
Old 08-24-2006, 04:54 PM   #50
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Re: SOX, bonds, etfs and covered calls

LOL:

If that works for you then go for it.

Personally I won't touch covered calls because of the reasons I posted earlier.
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Re: SOX, bonds, etfs and covered calls
Old 08-24-2006, 05:52 PM   #51
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Re: SOX, bonds, etfs and covered calls

I haven't touched them either since 2000...............wonder why??

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Re: So much for ER in 2010... (longish)
Old 08-25-2006, 09:47 AM   #52
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Re: So much for ER in 2010... (longish)

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Originally Posted by FinanceDude
I DO give them credit........ I am NOT questioning anyone's intelligence or resource on here, jsut pointing out that "convexity" is a ways beyond the basics of bond investing...............DURATION is something we all shoud know about...............

Kind of like "R-squared", or Sharpe Ratios on mutual funds........most people dont'care..............

If you can explain something to somebody in two minutes I don't think it's too complicated

http://en.wikipedia.org/wiki/Bond_convexity
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Re: So much for ER in 2010... (longish)
Old 08-25-2006, 09:51 AM   #53
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Re: So much for ER in 2010... (longish)

Quote:
Originally Posted by saluki9
If you can explain something to somebody in two minutes I don't think it's too complicated

http://en.wikipedia.org/wiki/Bond_convexity
And note that I said that "maybe" you would need to understand convexity. If you stay away from MBS and long duration stuff, it won't matter if you don't understand convexity.
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Re: So much for ER in 2010... (longish)
Old 08-26-2006, 01:38 AM   #54
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Re: So much for ER in 2010... (longish)

Quote:
Originally Posted by Lena
Thanks MB.

Speaking of trading stocks, does anyone have any good reading suggestions on writing covered calls?

Lena
Options as a Strategic Investment by Lawrence G McMillan
ISBN 0-7352-0197-8
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