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Questions About Covered Call Options

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  • Part of the option premia is volatility, which has been absent this year. Wait for it to come back before considering selling options again.

  • Exactly. Let the volatility pick up and premiums will come back on calls. I had to go out to Feb '18 to write a decent covered call as part of an options collar hedge I put on BA recently. So you can still find decent premiums if you either go "at the money" or go out several months 'till expiration.

    I do see puts are inching up in prices these days ... so the 'skew' tends to be on the downside, which suggests a pause or plateau in the markets since it costs a bit more to buy the protection these days.

    By contrast, during the GFC, I sold very out-of-the-money puts on some bigname companies (GE, CAT) that I wanted to own and did so at *insane* premiums - a few times I 'named my own price' and it filled immediately, which was scary to see. I never got put the stock b/c the market reversed itself in March '09 but wow, those were some insanely profitable winning option trades.
    fundalarm said:

    Part of the option premia is volatility, which has been absent this year. Wait for it to come back before considering selling options again.

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