[Omad]

(04-19-2018 02:00 PM)Hypno Wrote:  

I have used TDAmeritrade but now use Fidelity.

You generally need to fill out an application to get approval to trade options, and there are different levels of approval. Covered calls is the lowest.

Yes, you can also sell naked puts but not in an IRA. Also, the fact that it uses less capital. I konw for most equities the margin requiremetn is only 20%. But you need to stand ready to buy 100% of the stock with a naked put strategy, so thinking about your return on margin is not useful to me. Also, the point it to collect the dividend and the premium and capital appreciation, its not to swing for the fence. So 20+% is good enough for me.

To make an analogy, if you were an NFL coach and you had a running back who is guaranteed to get 4+ yards everytime he touches the ball, why would you pass? There is a value to reliability and predictability that only is appreciatged when your returns compound.

Yes, selling calls puts you at risk of a bear market. This strategy mitigates the risk by selecting low beta stocks, collecting a dividend, and collecting option premiums. If this stock goes down 10% this year, but I can pull this trade off 8 times, then I"m still up 30% because I have the dividends and the option premium in my pocket.

Ok, IRA is a little different, you can sell puts in an IRA as long as they are cash secured. I don't trade in an IRA.

I've got nothing against covered calls, I trade them occasionally. I've got one on at the moment, it didn't start as a covered call, it was originally a short put that was part of a straddle. I got assigned early on the put so I've been selling calls against the long stock to get back to breakeven.

However, strategy diversity is just as important as portfolio diversity, if not more so. If you have a portfolio of covered calls you've got neither strategy or portfolio diversity and you'll get crushed in a big down move.

As Running Turtles said, "Everything is peaches and cream when the market rises for nine years in a row. But when will the ride end?" A blind monkey throwing darts could of made money being long, that shit won't last forever and it's already a different market in 2018.

Like I said, i've got nothing agains covered calls, they're a good introduction to option trading and cost basis reduction, which is what option trading is all about. But they won't work in all markets.

Any active traders should check out Tastyworks, cheapest commissions ($1 per contract, capped at $10 per leg and no closing commissions) and best platform in the business, and it will only get better.