Re: Killing time
in response to
by
posted on
Jul 09, 2022 01:10AM
Not so quick comment related to your positive experience, but in reverse, Bodysurfer. I too sold some LAC Calls last year with a Strike price of $30 or $35, it has been awhile and I don't remember the exact transaction, but I do remember scrambling to buy them back as the price climbed close to, and eventually above, that Strike all the way to about $42 a share. Whatever cheap "Premium" you are making on the Covered Calls you are selling might be difficult to swallow should you see prior to expiration a sharp increase in the Share Price, despite how you might feel at this moment in time about taking $30 a share.
Covered Calls can indeed be "easy money", but selling Covered Calls doesn't always end without significant "complications". Your money is tied up until the Expiration Date unless you decide to buy back the Covered Calls and, just as I indicated above, it only takes a short time, in some situations only a day, for the Share Price to balloon up over and above your Strike Price. In my example I might have told everyone I was happy with a $30 a share price, but in view of the loss of the ability to sell those same shares for $42 a share then I can't say that I was totally "happy" about the situation, however, and to be fair, that was months before the recent sub $20 a share situation.
Doing Covered Calls is indeed "easy", but it does lock up those shares until Expiration unless you buy them back prior to Expiration... an event, that if it occurs, may wind up far exceeding the premiuim you gained by that "easy" execution of selling Covered Calls.
Not trying to be extra critical, especially if that strategy has worked out in a positive fashion for you so far. I once sold a Covered Call for a small fortune in a matter of a few seconds and the share price never exceeded the Strike Price prior to Expiration Date so I was indeed fortunate to have been able to keep the sizeable "Premium" and my stock shares. And.... it was "easy".
Okiedo