(12-15-2013, 09:58 PM)mjs_28s Wrote: So if you ran a buy/write, or selling 5 contracts on an already held position, with 500 shares and 5 contracts that were called away and assuming a $20 share price you would see the fees taking about this much: $6.95 commission (combined) + $2.5 (options cost) + $6.95 when called out = $16.40 total transaction cost. $16.40 / 500 shares = $0.0328 per share. So if you wanted to net say $0.20 per share premium you would need a premium that was at least $0.24 or higher.
Unfortunately, none of the example CCs had this type of return (.20 on a $20 equity), they were only 30-50% of that return and they were 76-88% probability of expiring OTM not 95% prob.
When dealing with these small returns, I've found that every bit makes a difference. In order to get the 1% return above, the probs get shaved against one's position, you cap your gain to get that probability and incur fees equal to 20% of your gain.
Again, if it works for you great. I don't think this is something very many DGI investors would do. Typical CC traders are looking for 1.5% net premium per month. The dividend stocks we typically use do not offer that kind of premium.
IMO if one wishes to start with CC they would benefit from using poor man's covered calls. Much less capital required, generating significantly higher % returns.
Good luck to all.