Jeff,
I would sell front month or one month out options to capitalize on the rapid deterioration at the end of the options life. It is true that you will have to buy/back options that go ITM or be called away. Try to think longer term. Each month you will capture time value and should your stock run up, you will give back a portion of the gain to roll-up. Selling a few months further out and a few strikes OTM will get you there also but I would suggest start doing that once this bear returns to hibernation.
Another thing to consider is that most stocks and ETFs do not fall straight down in a market decline. You could attempt to sell calls on short term corrections to the upside and perhaps be OTM by expiration, your short calls would expire worthless and you keep the premium, reducing you cost basis. Market timing is not for everyone and you will not always be perfect. Take what you can, small base hits, forget the "home runs."
Depending on how much capital you wish to allocate to this position, you may also think about adding shares at a point where you are convinced that the decline is over. You will get back to break-even faster but take care not to commit too many eggs into one basket.
I hold underwater stocks and ETFs but receive income from them each month. Over time, the cost basis is steadily dropping,,,patience is the key! Hope this helps.
Regards and great trading,
Jack W
I would sell front month or one month out options to capitalize on the rapid deterioration at the end of the options life. It is true that you will have to buy/back options that go ITM or be called away. Try to think longer term. Each month you will capture time value and should your stock run up, you will give back a portion of the gain to roll-up. Selling a few months further out and a few strikes OTM will get you there also but I would suggest start doing that once this bear returns to hibernation.
Another thing to consider is that most stocks and ETFs do not fall straight down in a market decline. You could attempt to sell calls on short term corrections to the upside and perhaps be OTM by expiration, your short calls would expire worthless and you keep the premium, reducing you cost basis. Market timing is not for everyone and you will not always be perfect. Take what you can, small base hits, forget the "home runs."
Depending on how much capital you wish to allocate to this position, you may also think about adding shares at a point where you are convinced that the decline is over. You will get back to break-even faster but take care not to commit too many eggs into one basket.
I hold underwater stocks and ETFs but receive income from them each month. Over time, the cost basis is steadily dropping,,,patience is the key! Hope this helps.
Regards and great trading,
Jack W
From: "devdanbrit@
To: ConservativeOptionS
Sent: Thu, July 1, 2010 11:44:24 AM
Subject: Re: [ConservativeOption
Jack
Thanks!!
Question on this MEE how far out are u saying to do the at the money calls MEE?
Atm if the stock turns up would I have to buy back at loss?
Thanks
Sent from my Verizon Wireless BlackBerry
__._,_.___
MARKETPLACE
.
__,_._,___
No comments:
Post a Comment