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Conservative option strategies, what did you buy or sell today?
#36
Here is an example of patience paying off when you sell a call on a stock you don't wish to sell, but are just trying to boost income. Lately this plays out favorably on a stock or two for me most every month. It requires some courage and the stock better be quality so it is somewhat predictable on the downside. As it applies to covered calls, we never know when a stock we wish to hold and are just trying to steal some premium on will run up WAY faster than we planned. Here is an example for Crimson to critique lol.

HD runs up fast near 180 from the high 160s I sell a call about a month out at strike $185 for only only $143. This is easy money. I can't lose since it is way overbought already right? $143 is a really nice three week monthly "dividend". It looked so good on paper lol.

So option is expiring last Friday I roll it forward. HD is like +$7.50 in the money and there is no hope I won't be exercised tonight. I buy back that call for $740! This $600 paper loss really, really sucks but I know I can resell a Mar 190 for $626 and buy some time and get back to even for now. I am now up like $20 by some miracle and endured the stress of missing the HD run trying to not sell my shares WAY under-market. But I still got my shares. I thought HD earnings would be mediocre and oh look that $626 call drops to way under $200 on the dip today, only a week later. Good chance it expires near worthless if I hold. I could retire it now and make a couple % overall. Certainly not how I planned it but the point is this requires some nerve, and you must be dealing with quality stocks or you lose in the end. Puts or call sales matters none when you bet wrong. I was WAY in the red on MO, MET, XOM, PRU etc. I was ridiculously under water on MO. Losing on MO would stink, but it was thousands had I panicked only weeks ago. It's a high probability you can dance your way out of a deep in the red play by selling time until the market or stock bounces. This rarely works with garbage stocks. Quality will save you with patience. I have never had to do it for more than a few months, but I would roll forward many months if I had to.

Yeah this option drama is not for everyone. The overall income makes it endurable for me every month. Hasn't failed me yet in some real bad months. I only SELL options and remain convinced the odds make me a winner over time, as long as I remain rational when it gets very ugly.
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Messages In This Thread
RE: Conservative option strategies, what did you buy or sell today? - by fenders53 - 02-26-2019, 10:27 PM
T puts ? - by john - 03-17-2020, 09:33 AM
RE: T puts ? - by fenders53 - 03-17-2020, 10:32 AM
RE: WEN options update - by john - 03-23-2020, 09:53 AM
RE: WEN options update - by fenders53 - 03-23-2020, 10:40 AM



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