WealthBoy: Receiving Dividends from Non-Dividend Stocks
Investing & Passive Income
· 1 year ago
I just sold naked puts on Wamu on Monday. Overnight they dropped 75% in value, which means I can buy them back for a 75% profit!!
that's like make dividends from stocks that you don't even own! ;-)
misanthropope
· 1 year ago
it isn't an _opinion_ question whether selling covered calls is worth it. it either IS or ISN'T, based on the numbers (and the individual investor's utility function, of course). you have anything quantitative?
stocks don't move smoothly, and the distribution of movement over same-size intervals is manifestly not normal. unless you knowingly are the owner of a stock which is overvalued (a curious situation) there is considerable real risk which you take on for the small premium of a far-from-money covered call.
WealthBoy
· 1 year ago
Investing & Passive Income:
Well, it's not really 75% if you take into account the margin requirement. What was the real return if you account for the margin requirement? I don't like selling naked options because of the very high margin requirements. I prefer to use use vertical spreads to limit losses as well as reduce the margin requirements. Even if you use stop loss orders, if the stock makes a big after-market/pre-market move against you, the stop loss isn't going to help when the options market opens and your short is way more expensive to buy back.
WealthBoy
· 1 year ago
misanthropope:
Well, the Microsoft example was using figures from a few days ago, if you want to call that “quantitative.” It isn’t too far off from $28 right now, and the April calls are still selling for around $0.60 (granted, it’s still a little more than a month away from expiring, since the expiration is on April 18). There are plenty of other stocks out there that can provide similar returns with covered calls. I you are in the curious situation of owning an overvalued stock, your risk is on the downside potential of the stock price, not from receiving a small premium on a call.
CFD Trading
· 8 months ago
You do have to be careful when the stock is well-below your cost basis and you perform covered calls. Many investors write calls as soon as they buy the stock..........
CFD Trading
· 3 months ago
options trading is an interesting new trading option for retail investors nowadays and it becomes more and more popular.
All Comments
that's like make dividends from stocks that you don't even own! ;-)
stocks don't move smoothly, and the distribution of movement over same-size intervals is manifestly not normal. unless you knowingly are the owner of a stock which is overvalued (a curious situation) there is considerable real risk which you take on for the small premium of a far-from-money covered call.
Well, it's not really 75% if you take into account the margin requirement. What was the real return if you account for the margin requirement? I don't like selling naked options because of the very high margin requirements. I prefer to use use vertical spreads to limit losses as well as reduce the margin requirements. Even if you use stop loss orders, if the stock makes a big after-market/pre-market move against you, the stop loss isn't going to help when the options market opens and your short is way more expensive to buy back.
Well, the Microsoft example was using figures from a few days ago, if you want to call that “quantitative.” It isn’t too far off from $28 right now, and the April calls are still selling for around $0.60 (granted, it’s still a little more than a month away from expiring, since the expiration is on April 18). There are plenty of other stocks out there that can provide similar returns with covered calls. I you are in the curious situation of owning an overvalued stock, your risk is on the downside potential of the stock price, not from receiving a small premium on a call.