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Covered calls using weeklys
Posted by: scanlin (IP Logged)
Date: August 6, 2010 05:40PM

I've been having good luck with the new weekly options. Available on some popular stocks like AAPL, BP, BAC, GOOG and some ETFs.

I do buy-writes and try to get 0.5%/week or better return. Do it 4x/month and you get 2%/month or 24%/year. Do it on margin and the numbers get better (with higher risk, for sure).

Anyone else trying it?

MikeS

[www.borntosell.com]

covered call investment tools


Stocks Discussed: AAPL, BAC, BP, GOOG,
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Rating: 2.0/5 (2 votes)



Re: Covered calls using weeklys
Posted by: Adib Motiwala (IP Logged)
Date: August 6, 2010 06:44PM

Hi,

I have been using this strategy of writing covered calls ( and cash covered puts).I usually don't do it weekly though. Either i write a call for the current month or a few months out. How does your weekly strategy work. I do not like using leverage/margin for option writing.

I use put writing too and its been doing well. I do get put the stock as well and I only do it for stocks that i want to own cheaper or get paid to wait.


Stocks Discussed: AAPL, BAC, BP, GOOG,
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Rating: 1.5/5 (2 votes)



Re: Covered calls using weeklys
Posted by: scanlin (IP Logged)
Date: August 6, 2010 06:54PM

I like the weeklys because of the quick time decay. For example, at the close today you could buy AAPL at 260 and write an Aug 13 strike 250 for 10.85. Your net debit would be 249.15. If called (and it's > 10 points in the money) then you make 0.85/249.15 or 0.34% in 7 days, or 17.8% annualized.

Note that I wouldn't do this today (Fri); I'd wait til Monday's open to avoid weekend risk, so it's really a 5 day trade (I've made it work as a 3 day trade, too, by doing the buy-write on Wed morning before that week's Fri expiration).

If not called then I own AAPL at a basis of 249.85, which I'm fine with, and will write calls for the following weeks.

If you don't like single stock risk you can do it with IWM (russell 2000) ETF too.

And if you do with with margin then the 17.8% annualized return can go a lot higher.

MikeS

[www.borntosell.com]

covered call investment tools


Stocks Discussed: AAPL, BAC, BP, GOOG,
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Rating: 2.5/5 (2 votes)



Re: Covered calls using weeklys
Posted by: Adib Motiwala (IP Logged)
Date: August 9, 2010 12:33AM

I am not sure I follow. Options expire the 3rd friday of the month. So are you saying you write the calls at the start of the 3rd week only?


Stocks Discussed: AAPL, BAC, BP, GOOG,
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Re: Covered calls using weeklys
Posted by: scanlin (IP Logged)
Date: August 9, 2010 12:45AM

There are now weekly options available on some securities. They're new. Introduced on Thurs and then expire 8 days later on Fri. Every week. See:

[www.cboe.com]

MikeS

[www.borntosell.com]

covered call investment tools


Stocks Discussed: AAPL, BAC, BP, GOOG,
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Re: Covered calls using weeklys
Posted by: Adib Motiwala (IP Logged)
Date: August 9, 2010 12:57AM

Thanks. I was not aware of weekly options. Where can you check weekly options prices?

That brings a question. What's next Daily options!!


Stocks Discussed: AAPL, BAC, BP, GOOG,
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Re: Covered calls using weeklys
Posted by: scanlin (IP Logged)
Date: August 9, 2010 08:14AM

I trade at Interactive Brokers, which treats weeklys just like monthlies (you can get quotes and do any strategy you want with weeklys). I'm guessing any of the options-focused brokers have weeklys, but I haven't checked (ThinkOrSwim, OptionsXpress).

MikeS

[www.borntosell.com]

covered call investment tools


Stocks Discussed: AAPL, BAC, BP, GOOG,
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Rating: 0.0/5 (0 votes)





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