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Moniedcoveredcall

Opening (IRA): TQQQ December 29th 34.5 Covered Call... for a 33.04 debit. Comments: Selling the monied -75 delta call against a one lot to potentially take advantage of early random call away/*assignment. 33.04 break even with a 1.46 ($146) max profit; 4.42% ROC/32.9% annualized as a function of buying power effect at max. "Random" call away occurs when someone holding the 34.5 long call choses to exercise it before expiration, but I'll look to close at or near max (e.g., 34.45) to avoid the call away/assignment fee if I get the opportunity to do so. On the flip side of the coin, I'll look to roll out the short call to reduce cost basis and my break even further if it chooses to crap its pants.
NASDAQ:TQQQLong
by NaughtyPines
Opened (IRA): TQQQ December 22nd 35 Covered Call... for a 33.55 debit. Comments: Selling the -75 delta call against ... . Metrics: Buying Power Effect/Share Price Break Even: 33.55 Max Profit: 1.45 ROC %-age At Max As a Function of Buying Power Effect: 4.32% ROC %-age at 50% of Max: 2.16% Delta/Theta: 26.44/2.98 Here's why I'm doing this instead of selling a put at the delta equivalent strike (the +25): if you look at the 25 delta put in the same expiry at the 35, it's paying around 1.27 at the mid (i.e., $127 max). The delta equivalent covered call setup has a slightly better max payout at 1.45 ($145) probably due to a couple of things: (a) IV skew (it's slightly higher on the call side than on the put); and (c) call skew. Relatedly, the short put break even is 33.73 relative the 33.55 break even of the covered call setup. I also wanted to see what the frequency of monied covered call random call away of shares was; most literature suggests early, random assignment is somewhat rare (around 7%) but there isn't much information out there in addition to that, such as when the highest likelihood of early exercise is (it's most likely when the extrinsic value in the call is de minimus) or how deeply monied the call is (which is related to how much extrinsic is left in the long call that the other person would be exercising; deeper in-the-money options have less extrinsic in them relative to less monied options of the same duration). This could naturally give the setup a slight edge over a short put, since an early exercise by a counter-party would result in max profit without having to wait until all the extrinsic has leaked out of the monied short call.
NASDAQ:TQQQLong
by NaughtyPines
Opening (IRA): SPY September 15th 421 Covered Call... for a 416.52 debit. Comments: A slightly different approach for the IRA -- a monied covered call paying around 1% of the debit paid at max. Metrics: Max Loss/Buying Power Effect: 416.52 Max Profit: 4.48 (1.08% at max/8.05% annualized) Break Even: 416.52 Delta/Theta: 18.05/11.21 Variations: Shorter Duration/Similar ROC: SPY Sept 1st 443 Covered Call Max Loss/Buying Power Effect: 438.42 Max Profit: 4.68 (1.07% at max; 7.80% annualized) Break Even: 438.42 Delta/Theta: 27.8/12.0 Same Duration/Higher ROC: SPY September 15th 445 Covered Call Max Loss/Buying Power Effect: 438.44 Max Profit: 6.56 (1.50% at max; 11.17% annualized) Break Even: 438.44 Delta/Theta: 32.6/10.6 Here, I'll be looking to take it off at or near max. The max is 421.00, so I'll be looking to take it off at .20 or so short of that or 420.80 or so, rather than waiting for the shares to be called away. Conversely, if price finishes below the 421 strike, I'll look to roll out the short call to reduce cost basis over time. There are some advantages to doing things this way in a cash secured environment over selling a put with a similar break even, which would be the September 15th 418, paying a comparatively paltry 1.25 credit (so your max would be $125) with a 416.75 break even. In order to get a similar max profit metric to the monied covered call writing a put, I would have to sell something like the 34 delta 450 strike, paying 4.58 at the mid, but it would have a much higher break even at 445.44 (and a resulting higher buying power effect). This only makes sense in this environment, however; on margin, the more buying power efficient avenue would be the short put.
AMEX:SPYLong
by NaughtyPines
TRADE IDEA (IRA): ROKU FEBRUARY 21ST 105 MONIED CCMetrics: Max Profit: 3.08 Max Loss: 101.92 (Assuming Stock Goes to Zero) Break Even/Cost Basis: 101.92 Delta/Theta: 15.75/10.76 ROC%-age At Max: 3.02%/32.4% annualized Notes: Although I generally don't play a ton of single name in my IRA, looking to deploy idle capital here. High rank/implied (56/78), good ROC%-age, and high probability of profit (84%). The natural alternative in a cash secured environment would be to sell a similarly delta'd put: the 15 delta 105 is paying 2.81 with a 102.19 cost basis if assigned. Earnings in 25 days versus this 34 day setup, but my intention would be to "play through."
NASDAQ:ROKULong
by NaughtyPines
2
TRADE IDEA: TQQQ MARCH 20TH 80 MONIED CCMetrics: Max Profit: $239 Max Loss: $7761 (assuming underlying goes to $0) Buying Power Effect (Cash Secured): $7761 Cost Basis In Stock/Break Even: $77.61 Delta/Theta: 15.11/4.43 Notes: High implied volatility underlying (56%). I don't play leveraged products as a general matter, but will dip at the well with a conservative setup like this that has a high probability of profit (the platform says 87%), particularly if I'm not doing a ton of other things and have the buying power to deploy. The ROC isn't great in cash secured (239/7761 = 3.1%), but will take it if I can get it over a 60 day period of time.
NASDAQ:TQQQLong
by NaughtyPines
TRADE IDEA: APA JAN 17TH 20 MONIED CC or JAN 17TH 20 SHORT PUTWith broad market and exchange-traded funds being temporarily unproductive from a premium-selling standpoint, I've been scouring the earth for high rank/high implied underlyings. APA (100/74) is one of them with earnings in the rear view. Pictured here is a monied covered call with the short call at the 20 strike in the January cycle. Markets are showing wide here (16.05/17.70/19.34), most of which is due to after hours pricing of the stock, which ended the regular session at 23.22, with the short call at 4.17 at the mid, implying a possible fill of 19.05 with .95 max for the monied covered call (5% ROC); the same strike short put pays .91 at the mid with a cost basis of 19.09 if assigned, so it's six of one, half dozen of the other in a cash secured environment, but greater buying power efficiency on margin by going short put over the covered call. Go less monied with the call -- at the 22.5 strike, and you're looking at potential 20.65 fill and 1.85 max (9% ROC); the 22.5 short put pays 1.76 with a cost basis of 20.74 if assigned.
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by NaughtyPines