Alan answers a question coming from Ron of Milwaukie, OR. Ron writes… "Will you enter a position when the market is in general decline, or when the futures are down and you know that the market will gap down at open? In other words, will you enter a position overnight or wait until the market has opened, and stabilized?"
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First off the Blue Hour was great! Thank you for this awesome addition to the best valued membership on the planet. Ok the introduction of the over writing concept had me out of my chair…OMG this is a cake eating scenario on steroids. Thank you so much for answering my Q on the program re strike prices. A thought jumped to mind; if, as in overwriting, your true intent is to never sell the dividend producing stock then the intrinsic value seems to take on a lesser role if I understand this correctly. Yes we must discount the stock in case of assignment but…if it is not assigned and we “keep” the stock then the return on investment for the premium would be significant, once the dust settles :-). It would take vigilance to make sure we are not assigned and yes I remember there is that rare risk, so appreciate that explanation, WhooAhh
Thank you Again
Yes, when portfolio overwriting, intrinsic value does take on a lesser role. In this specific approach we use only out-of-the-money strikes as our goal is to allow continued share appreciation and additional option income. This is different from traditional covered call writing when our portfolio is turning over frequently and we may use intrinsic value to protect time value in bearish or volatile market scenarios.
When portfolio overwriting, if the strike is in-the-money as expiration approaches (option has intrinsic value) then we must role the option prior to 4 PM ET.
Thank you for participating in the premium member community and your generous comments regarding our first Blue Hour webinar.