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Selling calls
Old 03-18-2020, 07:07 AM   #1
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Selling calls

So ... I have a beaten down position in Vanguard Total Stock Market. Would it be the silliest thing in the world to sell it and replace it with SPY then sell call options for a little income? I think "getting called away" is less of a risk with an index ETF vs. a single company stock, am I right?

I was positioned a little too aggresively and I'm just trying to stem the blood flow as conservatively as I can
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Old 03-18-2020, 07:33 AM   #2
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....I think "getting called away" is less of a risk with an index ETF vs. a single company stock, am I right? ...
I don't see why that would be right... if the call expires in the money then the owner will exercise it whether the underlying is a single company stock or an index ETF or bannanas or apples or oranges.
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Old 03-18-2020, 07:48 AM   #3
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Well I just mean that it is less likely that an index will move as much as an individual stock, hence the ETF rising so the call is ITM might be less likely, that's all.
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Old 03-18-2020, 09:43 AM   #4
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If you can predict the future, you are golden.

I used to do this a bunch, and like many folks say;
it works !!!.
So I do it again and it works !!
And i do it again and Called away... as stock market jumped fast... I missed out on big rise per share.
Market kept going up from there.

Let us know how it goes if you do it.
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Old 03-18-2020, 11:29 AM   #5
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Well I just mean that it is less likely that an index will move as much as an individual stock, hence the ETF rising so the call is ITM might be less likely, that's all.
Sure, I would rate that absolutely true (well, depending on the stock of course, but true in general).

However, like all the "known info", it does not help you one bit. The call premium you get will be lower to reflect that lower volatility. It's a wash.

edit/add: as more of an example, if you look at an equivalent premium on a more volatile stock, for the same value, that call will be much further out of the money on the stock, so the odds of the stock getting ITM is about equal to the index, on a dollar-dollar basis.

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