Texas Proud
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- May 16, 2005
- Messages
- 17,383
Covered calls and selling naked puts have the same profit profile. The problem with covered calls for a trader is needing to tie up huge amounts of capital to buy the stocks so you can sell the calls. When selling naked puts, you can use collateral from the rest of your portfolio to sell the puts. You dont tie up any money at all.
Now, if you already own stocks for the long term and want to sell calls for additional premium thats a different story.
It was when I first started working, doing tax returns... there was a client who had sold his company to a listed company and held about 10% of the outstanding shares... It was not a huge company, but pretty big...
He made over $100,000 per year in selling covered calls... it was part of his sale strategy to sell stock on a regular basis.. if he had to cover the call, no big deal as he had planned to sell shares anyhow.... if he did not, then he kept the money from the call...
I was pretty shocked at how much he could make doing the options...