Quote:
Originally Posted by DaveJ
Low risk = Low return 
The amount the stock goes down will be(mostly) more then the amount you get in premium... Therefore you are effectively throwing good money after bad. And when you finally do get exercised, well below your initial purchase price, you just crystallize the loss. |
Thanks ... Didn't think of it that way. So maybe don't write a covered call when the share price is lower than the original purchase price ??? Question then is, what do you with the stock for that month ? Hmm .... ( Just thinking it through ).
Quote:
Originally Posted by DaveJ
Have you considered brokerage?? If you are using only a small amount of cash (ie 1-5 contracts) then brokerage will 'eat' into a lot of your profit. You would need to work out some numbers. You will also have to 'time' your trading quite well to 'trade' inside the written call and the purchased PUT, or you will be up for more brokerage when you exercise the option(ie stock trade brokerage)
I have not heard/read many people being successful over the long term trading the 'collar' as their main strategy. Although Stig seems to have found a website discussing it.
Happy Trading. 
P.S. There is risk in EVERY options trading strategy... If you can't find where the risk is then you are not looking hard enough or don't fully understand the trade  |
I did not say there was NO risk, I said low risk .. .though the phrase "could not loose" was probably leading to that.
But isn't it ( covered call, collar ) a good thing for a beginner instead of trying out other option strategies like buy-write puts ?
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