Comments on: Is There Less Risk Using Deep In-The-Money Long Calls versus Covered Call Writing? https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/ Learn how to invest by selling stock options. Wed, 01 Aug 2018 11:41:39 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/#comment-176435 Wed, 01 Aug 2018 11:41:39 +0000 https://www.thebluecollarinvestor.com/?p=16875#comment-176435 In reply to Hoyt T.

Hoyt,

Thanks a million for sharing. I may use this for a future blog article or video…valuable information for our community. I know you must have an impressive file of winning trades as well.

Alan

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By: Hoyt T https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/#comment-176187 Fri, 27 Jul 2018 14:58:09 +0000 https://www.thebluecollarinvestor.com/?p=16875#comment-176187 Jay,

I think you have hit the nail on the head. The gambler’s blood keeps me sometimes from following the rules I have set for myself. In the case of FB I knew that there certainly was the possibility of problems due to the EU’s new law, privacy concerns and added security costs. I just didn’t expect them to have an effect this soon. To be clear the major drop in FB did not occur initially with the earnings report. That drop was roughly 2%. The real drop came at the conference call when FB executives really talked down future growth and profits. They have done this twice in the past, supposedly to dampen expectations after unusual run ups like we had here, all time high on Wednesday. One positive in the report was that revenue per user was up. I think at its current PE the stock can move up.

I am not an active FB member. I signed up years ago and have not done anything on it.

As I have said before I admire those who have the self discipline to follow their rules and not gamble. Having said that I have, all my life, at times pushed the envelope. You only live once so sometimes you just do some wild things. But I don’t spit in the wind or tug on Superman’s cape.:)

Take care,

Hoyt T

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By: Jay https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/#comment-176155 Fri, 27 Jul 2018 01:45:40 +0000 https://www.thebluecollarinvestor.com/?p=16875#comment-176155 In reply to Hoyt T.

Hoyt,

I have a hunch most of us who dabble in buying options have a FB story. Or we have either not done it enough or been very lucky! Like Kevin Bacon’s character in the classic Animal House I have “assumed the position” many times and taken my share of paddling :).

Like you I seek lessons each time. It’s funny how they keep coming back to the same things: trade small, take profits when I have them, cut loses early and never take myself too seriously!

I don’t think investors who hold quality positions and over write them have these dilemnas. They don’t have that little ounce of gambler’s blood in their system I have :). – Jay

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By: Hoyt T https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/#comment-176131 Thu, 26 Jul 2018 14:43:33 +0000 https://www.thebluecollarinvestor.com/?p=16875#comment-176131 All BCI members and followers,

A real life test testimonial to what Alan has been teaching for years.

On 03/26/2018 I purchased OTM 10 contracts FB Sept 21 ’18 $170 Call at $7.70.
Fees and commission were $9.95(totally irrelevant). Total Cost = $7,709.95.
FB was trading at $159.83.
I have mentioned in a previous post how I had violated most all of my position management rules on this trade all along. Well long story short:
Yesterday FB Sept 21 ’18 $170 Call closed at $39.35 giving me an unrealized profit of $31,454.88 or a 407.44% gain. Note: These numbers are taken of my daily brokerage statement as of yesterday’s close so they may be fractionally off, but close enough.
This morning FB Sept 21 ’18 $170 Call opened at $7.50 giving me a drop of $32,000.00 in position value and now a loss of $209.95 in my position. My $7709.95 investment was now worth $7500.00.
What’s the lesson here? Let me count some of them.
1. Follow the rules.
2. Earnings dates are not to be trifled with, ever. (see BCI)
3. Bulls make money, Bears make money, Hogs get slaughtered.
4. An old friend once told me, “The greedy soon join the ranks of the needy.”
I am sure you can think of more.
By the way I knew last night that this was going to happen. The Delta on FB Sept 21 ’18 $170 Call yesterday was .92 so I could calculate based on the drop in price approximately what my drop in value was. Did I sleep good last night? Surprisingly, yes.
This morning I had to decide if I had not owned FB Sept 21 ’18 $170 Call would I buy it at $7.50. My answer was yes. In a few minutes it briefly got to over $9.00. I felt better. As I post this it is done to $7.00. Aren’t I smart?:)

For what it is worth,
Hoyt T

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By: Alan Ellman https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/#comment-176126 Thu, 26 Jul 2018 13:46:11 +0000 https://www.thebluecollarinvestor.com/?p=16875#comment-176126 In reply to Mauro.

Mauro,

Early morning and late afternoon computerized institutional trading frequently results in high volatility as you described. Exit strategy execution aside, I make the bulk of my trades between the hours of 11 AM and 3 PM ET. Calculations can be run the night before to get a general idea if the option sales will meet our goals but must be re-run prior to trade execution…won’t take that long.

The 3 new calculators are geared specifically to the 3 covered call writing-like strategies detailed in the new book and are, therefore, complimentary to the Elite version of the Ellman Calculator.

Alan

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By: Mauro https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/#comment-176125 Thu, 26 Jul 2018 13:10:35 +0000 https://www.thebluecollarinvestor.com/?p=16875#comment-176125 Alan good morning,

When the market opens the price move very fast so I have difficulty to record the number on Elite Calculator in order to take a decision.
If I’m trying to do that before the opening my platform (TradeStation) not always show the correct value or when open the market the scenario change.
Do you have any suggestion? Maybe I should wait some time before to take note of the numbers?

Last question: I bought your last book and the set of calculators, honestly I just start to read the book but I would like to know if this set of calculator replace the Elite one or it’s complementary of it?

Thanks in advance and have a nice day.

Mauro

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By: Terry https://www.thebluecollarinvestor.com/is-there-less-risk-using-deep-in-the-money-long-calls-versus-covered-call-writing/#comment-176122 Thu, 26 Jul 2018 13:06:28 +0000 https://www.thebluecollarinvestor.com/?p=16875#comment-176122 Hope no one has Facebook shares.

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