I've gotten into trading weekly covered call options. I'm making 1.6% per week if I set the strike price at 3% growth per week.
If the price per share hits the strike price at the end of the week, my stocks are sold at the strike price no matter how high the price per share is at that time. If the strike price isn't hit, the stocks aren't sold. Either way, I get the 1.6% premium--which I use to reinvest in stocks. Every Friday, the options expire or are exercised, and every Monday, I make 1.6% by reselling covered call options or buying stocks and then repeating the process (if the options were exercised on Friday rather than just expiring).
1.6% x 52 weeks in the year = 83.2% growth of principal.
If the profit is capped at 3% per week, that's 156% growth per year, not counting options premium.
I'm doing this for mainstream companies: Apple, Adobe, AMD, Nvidia, Microsoft, Facebook, PayPal, etc.
This only works in a crabbing market mate. Don't get too cocky.
Ayden Long
Are these stocks you want to hold anyway? What if the you keep the call premium but the underlying takes a fat shit and drops 3-5% for example. You may as well complete the "wheel strategy" and sell cash covered puts to lower your basis and then once its exercised and you have the underlying then sells the calls as you are doing. If you never get assigned with the put then you keep the premium rinse repeat
The third type, me, is the guy who didn't even read OPs post.
Jeremiah Cooper
I sell covered calls sometimes too, just don't act like it's free money lol.
Colton Jones
1.Create a Fidelity account. 2.Create a brokerage account with Fidelity. You can then fill out an online form to request authorization to trade covered call options. fidelity.com/options-trading/start-trading-options 3.Put money into your brokerage account. You can do this by transferring money to it from a bank account. 4.Buy stocks in increments of 100 for companies that offer weekly options contracts. cboe.com/products/weeklys-options/available-weeklys 5.One options contract = 100 shares of stock. For every 100 shares of stock, you can trade one options contract."Sell to open" one options contract for every 100 shares you have of a stock, set the expiration date a week out, and set the strike price for 3% above the current price per share; you get the options premium immediately and what happens to your stocks will be dictated by the price per share as of the target date.The options premium should be about 1.6% per week for mainstream companies. Example:You have 885 shares of stock of Company A.You can sell 8 options contracts.Assume the price per share is $50, the target date is one week out, and the strike price is $51.50/share(3% growth from current price per share). Your options premium is 1.6%,so 800 shares x $50/sharex1.6%=$640 in weekly options premiums for your $50k worth of stock. ($640x52 weeks = $33,280 in options premiums alone each year, ceteris paribus).Let's pretend now that as if the expiration date of the option the price per share is not at least the strike price; this means that the option expires and you keep the options premium.Now let's pretend that the stock's price per share exceeds the strike price (ie it is at least $51.50);your stocks are sold to the holder of the options contract for $51.50/share no matter how high the stock's price is-but you still keep the option premium. Essentially, in exchange for a guaranteed payment, you are capping the amount of profit you can earn from a stock.
Excuse the weird spacing but I was like 42 characters over postlimit
Jaxson Reed
My nine year old daughter has $5k in her brokerage account. She can make $80/wk at the 1.6% option premium rate with 3% wiggle room for growth before the option can be exercised--rather than expiring.
$80 x 52 weeks = $4,160 in options premiums per year.
3% growth per week as the cap means that I'm giving the stock 3% x 52 weeks (156%) room to grow per year, which is freakishly high for a stock.
$5000 + 156% growth ($7,800) + $4,480 = $17,280 what the $5k became at the end of the year, assuming the 3% strike price is hit each week, 1.6% option premium each week for capping potential profit at 3% each week, and the options premiums not being reinvested each week to buy even more stock to cause even greater exponential growth.
Assuming the stock doesn't go up a single penny per share but I'm still earning the option premium for my daughter, that's $5,000 + $4,480 option premium = $9,480 at the end of the year, not counting exponential growth via compounding growth via reinvestment.
Brayden Moore
Here's where I'm lost. How do you not lose money if the strike price isn't hit? I thought call options are a contract in which you have to sell your option at its expiration. I don't understand how you're not losing out on your premium.
If the market an heroes and OP never gets to sell his options. That's what a black swan is (retarded swan posters think this will happen "in X days") See: 2001, 2009
Camden Walker
What about taxes?
Jacob Collins
based thread OP, I'm curious though, if your shares get called away why don't you sell Cash Secured Puts until you get assigned?
Luke Bell
Okay so the option only sells if it hits 3% growth. Otherwise he gets to hold onto the option which he can sell come Monday.
Market has giant crash and there's no opportunity to sell the option.
Zachary Torres
Thanks, I definitely appreciate the education. What’s the worst case scenario? Like if there is a luquidity lockup or other shenanigans such that there’s no buyers for your options. Are you out just the money you’ve invested (the $5k in your example), or is leveraged?
Jaxon Rodriguez
Worst case scenario, stock drops and never recovers leaving you holding shares at a higher price than you could sell at. Hence why OP is doing it on valuable tech stocks which, in the long term, should rise in value.
Carter Watson
Worst case scenario is stock goes to $0 overnight, at which point the shares you own are worthless, you pocket the full premium, and you're out. Liquidity lockup is good for you unless you're trying to roll down the calls when the value of the underlying suffers.
Jaxson Scott
Nigger an option is a derivative of an underlying (your stock). You own the stock and sell a call option against it giving someone else the right to buy it at that price.
If stock moons you make money. If stock super-moons you make same amount of money but might feel bad cuz you had to sell at set price and missed out gains.
Downside stock crashes. You make the premium off the option you sold, but that doesn’t make up for your stock losses,
Hunter Jenkins
Oh fuck I almost forgot. OP: your shit doesn't really work like that. Premiums are up because of vola. Premiums go way down during more normal markets. You'll have to aim for ~1% weeklies to get any premiums worth mentioning. It's a good way to add 10%+ to your returns if done well, but it's not going to give you 70%+ as you're experiencing right now.
Chase Ramirez
What do you do when your underlying 100 shares take a 10% dive? You get to keep your 1% premium, but now you're stuck with 100 shares down 10%
$100 per share, 100 shares = $10,000 Down 10% = $9,000 Gain 1.6% on 10K = $160 Net = $9,160
From that position, it would take you 5 weeks to recover if you gained 1.6% a week Week 1: 9306 Week 2: 9455 Week 3: 9606 Week 4: 9760 Week 5: 9916
Is your thinking that you plan on holding the stocks anyway for many, many years? So you're not too worried if it does take you 5 weeks to recoup losses, as in the end you have faith the stocks will rise?
