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Genworth Financial, Inc. Message Board

  • jim280zxt jim280zxt Aug 2, 2010 4:08 PM Flag

    rob and west

    you guys are option newbies but todays closing prices should interest you as to why playing the covered call route is a prudent way to play the game.

    gnw was UP about $.08 on the day...

    every aug or sep $13, $14 $15 and $16 call declined in price

    the bottom line for a covered cal investor is that their LONG shares increased in value and their SHORT SOLD covered calls decreased in value.

    the net result is your long gnw shares improved as did your SHORT SOLD covered calls.. a double win day.

    jim

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    • rob

      just because you sell a few jan $15 od 2012 for $2.90 to $3.00 doesnt mean you have to hold that position for that long.

      sooner or later one of your close month atm call will expire perfectly just below the strike price with no buyback required.

      when that happens you can buy lets say $5 of the contracts back at $3.00 or under for $1500 and then sell 55 close month calls for $.70 instead of only 50

      cash out $1500..cash in $3850 for a net $2350 for the month

      the beauty of having some some time frame cc out is you dont get into trouble with a wrong timing move.

      also bear in mind selling 10 calls for $3000 instead of $400 is a lot of capital to work with in the interim.

      btw in the big picture you should take the bif=d price on the leaps most of the time...

      $2.90 or $2900 is a lot better than an $3000 fill you MISS at $3.00

      penny wise..pound foolish

      jim

    • Jim,,

      Thanks. See how tomorrow plays out.

      West.

    • jim- would think a 'double win day' not common, of course i'll take it. also i like share accumulation at $0 cost, remindes me of a savings account, takes a while to see big results prodused by compounding. as long as the 'products value' does not deteriorate. ie. savings/inflation -- stock/underlying value. so far so good.

 
GNW
7.86-0.10(-1.26%)Apr 24 4:01 PMEDT