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I do see your point there...I guess a lot of people would prefer to sell options hedged with options so their not having to tie up all their margin in a few trades. Its a huge margin risk to calculate your returns on. |
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Yeah, but it is almost a no lose trade. That is if you watch it carefully.
Also, on paper it's a huge margin risk, but in reality there is no risk,
zero risk, because you will cover the call at, or just before the strike if needed, even just above strike is ok. If after buying the stock it starts to drop, just sell it at market
above the breakeven point.
You enter the trade receiving, not spending, cash.
It doesn't matter if the underlying goes up or down.
Even if it goes above the strike before you can act you have a cushion to
work with, the premium you received.
Sell a call near the expiration to avoid the need to watch it closely for 5 or
6 weeks.
You don't need to study charts to pick a good company, just look at the
options chains for different stocks until you find an option with
a high enough premium to make it worth the while. Probably at least $1
All you really need to do is be prepared to buy the stock, no problem
If it does go above the strike if the option is excercised that's ok because
chances are you will still be within your profit zone, if not and you take
a small loss, that will happen from time to time, but not often
Like I said before, a gap up before you buy the stock, or a gap down after buying the stock are the 2 risks to this trade.
Oh, this is all my opinion, not a recommendation.