Renting Out Shares

jms · 05-01-2008, 01:09 PM

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 ?

Tropo · 05-01-2008, 02:03 PM

But isn't it ( covered call, collar ) a good thing for a beginner instead of trying out other option strategies like buy-write puts ?

jms,

Options are NOT for a beginners.
Try stock market first (shares).
Do not try to fly if you do not know how to walk properly.
But that is only MHO.

The Stig · 05-01-2008, 04:35 PM

Quote:

Originally Posted by Tropo

Options are NOT for a beginners.
Try stock market first (shares).
Do not try to fly if you do not know how to walk properly.
But that is only MHO.

Too true

DaveJ · 06-01-2008, 08:54 AM

Quote:

Originally Posted by jms

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 ).

The Covered-Call Strategy is usually implemented in a flat or uptrending stock. This way the stock price will generally rise between months (or at least over a 2-3mth period). The last couple of years are a great example. Others on this forum have commented that they have been very successful with the CC strategy

You just have to use the appropriate strategy for the current market conditions. .. Some strategies just won't work all the time.

Happy trading

Take Stigs advice: Read/research forums/websites that trade that strategy and then 'papertrade' it in the live market. You will soon work out how it all works, what the pitfalls are and what the rewards are. Just take things slowly

Ol School Skata · 06-01-2008, 06:51 PM

I have been using the covered call strategy for the past 2 and a bit years and as a guess it has returned approx 20 plus percent returns pa.

I have used this strategy on lgl, bhp, zfx, amp shares but mainly lgl. Happy to give you more info if you pm me.

OSS

DaveJ · 07-01-2008, 10:58 AM

How has ZFX worked with the Covered Call strategy since July07? Its in a nice downtrend...

Ol School Skata · 07-01-2008, 04:38 PM

I have not continuously written calls on zfx - a couple of select months. Was not exercised on these. I generally float my money across stocks depending on the current share price and price history.

OSS

melbear · 13-01-2008, 11:07 PM

Unfortunately I've got a huuuuuge chunk of my money in ZFX. First started when they were at $7.72, got exercised at $8 and followed them up. Latest purchases were actually at around $17/$18. Been watching the freefall with dismay, but as my strategy is income focussed I'm writing lower priced calls to still get the income. I'll only get exercised if ZFX has a massive turnaround and jumps about 4 strikes in a month, but if that does happen I'll take the cash and invest again.

BHP, BNB, OXR are other favourites.