Comments on: Selling Deep Out Of The Money Covered Call Options https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/ Learn how to invest by selling stock options. Wed, 25 Sep 2013 23:34:43 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/#comment-16880 Wed, 25 Sep 2013 23:34:43 +0000 http://www.thebluecollarinvestor.com/?p=8610#comment-16880 Premium members:

This week’s 6-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site. The report also lists Top-performing ETFs with Weekly options.

For your convenience, here is the link to login to the premium site:

http://www.thebluecollarinvestor.com/member/login.php

NOT A PREMIUM MEMBER? Check out this link:

http://www.thebluecollarinvestor.com/membership.shtml

Alan and the BCI team

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By: Alan Ellman https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/#comment-16856 Mon, 23 Sep 2013 16:52:50 +0000 http://www.thebluecollarinvestor.com/?p=8610#comment-16856 MEMBERS: Click on Ric’s image to enlarge and use the back arrow to return to this blog.

Ric,

It appears that the platform is identifying the options exchange from which the quote is coming. There are several such exchanges. For example:

Q = Nasdaq

A = Amex

Z = Bats

M = Miami

Good question.

Alan

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By: Ric https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/#comment-16855 Mon, 23 Sep 2013 16:47:04 +0000 http://www.thebluecollarinvestor.com/?p=8610#comment-16855 Alan,

Can you explain what the letters that are to the right of the BID/ASK prices mean on the attached file? I thought the “C” was for “Call Option” but got lost when I saw the Q, A, Z, M, &, T…

Thanks,
Ric

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By: Alan Ellman https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/#comment-16854 Mon, 23 Sep 2013 16:43:14 +0000 http://www.thebluecollarinvestor.com/?p=8610#comment-16854 Hi Bill,

My responses:

1- Highly liquid options tend to have small b-a spreads. Market makers make very little per contract but make up for it with huge volume.

2- Certain securities have weekly options associated with them as opposed to just “monthlys” SLV is one such security. We identify ETFs with weeklys that pass the BCI screens in our Premium ETF Reports.

3- Based on supply and demand and new flexibility that exchanges have certain securities trade in $0.50 increments. SPY is another.

Alan

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By: Bill https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/#comment-16853 Mon, 23 Sep 2013 16:41:25 +0000 http://www.thebluecollarinvestor.com/?p=8610#comment-16853 Alan,

I am wanting to write a covered call on SLV. But I have a couple of questions.

1. Why are the spreads only .01 cent?
2. Why are there series ending every week of the month?
3. Why are the series of OTM calls separated by only .50 cents $22, $22.50, $23?

So much to learn.

Thanks,

Bill

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By: Alan Ellman https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/#comment-16842 Mon, 23 Sep 2013 02:48:39 +0000 http://www.thebluecollarinvestor.com/?p=8610#comment-16842 In reply to Bruce.

Bruce,

We are on the same page here as far as an option is concerned. In my view, the IV plays no role in stock selection (for our watch list) because I would never write a call on an under-performer given any IV.

As far as an option is concerned, assuming we are looking at calls with similar expirations, premium profit is mostly contingent on time value which is mostly impacted by IV. So we are in effect making our decisions based on our investment goals and personal risk tolerance. For example, I consider myself a conservative investor and would rarely use an option that returns > 6% for an ATM, 1-month option. The reason: the IV is too high and therefore so is the risk. On the other hand, I would rarely use an option that returns < 2% for a 1-month option (unless using ETFs) because the IV is too low and the returns will not meet my goals. This topic is detailed in my books and DVDs. Therefore, your point is a good one and right in line with the BCI methodology where IV does play a major role in our cc writing decisions. Alan

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By: Bruce https://www.thebluecollarinvestor.com/selling-deep-out-of-the-money-covered-call-options/#comment-16839 Mon, 23 Sep 2013 02:25:56 +0000 http://www.thebluecollarinvestor.com/?p=8610#comment-16839 In searching for a strike or even a stock, why wouldn’t the implied volatility be of use in sorting out best return for the risk?

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