Lets take a favorite stock of mine and my largest holding PM. I currently think that it is under valued. A call a year out with a 10% upside doesn't really pay much. The $95 call at Jan '15 gets you $156 before commission. I don't like getting that small of an amount for selling a call a year out. I really think going up more than 10% has a pretty good chance of occuring. This is why in the new year I will most likely be buying more of PM. To get larger premiums, you need to sell closer to the strike price. Though doing so will cause you to lose out on dividend payments if the price goes up much and the call is exercised early. A year has too much uncertainity for me to sell calls.
The pros are much higher premiums for selling the longer calls. Selling a $95 call for March '14 only gets you $20 where the Jan '15 gets you $156. Also less commissions you have to pay when you sell one call a year instead of one every 3 months.
Selling longer term puts are great as long as you don't mind having your cash locked up long term. Though you will miss out on all the dividend payments. I've never had a put called early. They seem to always want to collect the dividends before giving me the stock.
Selling calls and puts on margin is something totally different. You will need someone that is a lot riskier than me to go over those options. No buying on margin for me. I know that I am possibly missing out on some very large gains, but the downside makes me not want to mess with it.
Hope this helps.
The pros are much higher premiums for selling the longer calls. Selling a $95 call for March '14 only gets you $20 where the Jan '15 gets you $156. Also less commissions you have to pay when you sell one call a year instead of one every 3 months.
Selling longer term puts are great as long as you don't mind having your cash locked up long term. Though you will miss out on all the dividend payments. I've never had a put called early. They seem to always want to collect the dividends before giving me the stock.
Selling calls and puts on margin is something totally different. You will need someone that is a lot riskier than me to go over those options. No buying on margin for me. I know that I am possibly missing out on some very large gains, but the downside makes me not want to mess with it.
Hope this helps.