Re: Advice when selling covered calls, in or out of the money?
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i did a trade like this on HOV 2/26... I bought 1000 HOV for 74.5, waited til 3/8 when HOV was at 90.22 and sold the feb 75.00 calls X10 for 15.20 (15,200) selling for 75 what i bought for 74.50, with a 20% return UP FRONT for the MONTH.
and my goal was 5%/month...
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Maybe I misunderstood what you wrote... but how does that make any sense? You bought a stock at 74.50... good stock pick, it runs up to 90.22. Why would you bother selling the Feb 75 calls for 15.20? Why not just dump the stock? How are you any better off selling the options? What is the point of selling options that have no time value? The intrinsic value of the option is basically 100% of its worth at that point due to it being so deep in the money.
Also, what would you do if the stock hadn't run to 90+? What if it had fallen to 65?
And, it doesn't take a Rocket Man like me to know that 5% monthly return is not achievable over long stretches of time.
-RMJ
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