Toronto Escorts

What's the down side of writing cover options?

Danny46709394

Active member
Feb 25, 2017
209
105
43
To be honest, I am kinda pussy. I don't want to see my bank account balance goes down, so I have a lot of bluebchips. These stocks aren't generating much other than a few dollar of dividend. I want to write some cover calls to make some money on the premium. If it get execrises at the target I want, I am ok with it. What's the down side for this?
 

hoorawr

Active member
Oct 5, 2008
351
72
28
The downside is you still carry the risk of the underlying going down and losing value , (as opposed to UP which you’re assuming will happen)

If you are bearish, you can write covered puts instead, so you sell at the target price (if it hits) instead. And still collect your premium

In any case, the IV (implied volatility) and therefore the premium of the options for your boomer stocks won’t be much... but it’s still better than nothing :)

Writing covered calls / puts is a low risk strategy. You are being paid by the theta gods
 

rafterman

A sadder and a wiser man
Feb 15, 2004
3,422
77
48
If it get execrises at the target I want, I am ok with it. What's the down side for this?
That is the downside. You're selling the upside to the stock above the strike price for the premium. It's an opportunity cost of a loss in capital gain if the stock moves up and it gets called away.
 
  • Like
Reactions: Blackswann2000

fall

Well-known member
Dec 9, 2010
2,745
680
113
That is the downside. You're selling the upside to the stock above the strike price for the premium. It's an opportunity cost of a loss in capital gain if the stock moves up and it gets called away.
That! And you are still going to lose money if stock goes down. If you are really OK with limiting your potential gains but want to protect yourself against possible losses, write out-of-money call options and use the proceeds to buy out-of-money put options. Or, better yet, stop thinking that you need to do something, just stick with your well-diversified blue-chip portfolio and be happy.
 

ActionJ

Active member
Jan 17, 2004
199
52
28
Just the possible missing out of additional gain between strike and market price. If you value your stock like a member of your family and happy with the 5 to 10% rtd, then dont risk them. But if you are looking for more, than writing cc is the way to go. Just be careful of the call expiry date and the record date.
 

decoy2673

Well-known member
Oct 31, 2010
435
260
63
You lose your potential upside but keep all the downside.

Essentially you're trading away the future gains and getting them paid out to you weekly/monthly instead.

The premium for stable stocks like MSFT for example is shit. like not even worth doing
The premium for more volatile stocks like TSLA is great. You can make a couple % writing weekly or monthly calls.
But then every so often the really volatile stock will have a -20% day or something and wipe out all your gains writing premium.

Its really not as enticing as it sounds.
 
  • Like
Reactions: WULA
Toronto Escorts