"Real trade - TEX was $23.30, and I sold the ONE month $24s at 80 cents. So I took a FOR SURE 3.4% for the month, and still had 70 cents upside. I've traded the calls, but if I hadn't, OK, I'd have 6 cents I left on the table so far.
But I received an immediate 3.4% for the MONTH, and have gained another 3%. 6.4% in a month, compound that?, I'll take it. If TEX goes, and STAYS at $40 over the next two weeks, oh well, I blew it."
Seems like you may have blown it this month. The whole point isn't how much you make month to month its about the 1 in 4/5 months where you really blow it. You have essentially capped all your upside and are betting the stock will be flat. Why even invest.
To make money? Hope you're just advocating a point, and not trying to start a #$%$ contest. Because over the year and a half, TEX has gone up a grand total of NOTHING...... it's the same price it was in MAY of 2011. Go back a couple of months, and it's DOWN 25 - 30%.
And all that time, the option premiums crank out about 3% a month. As I said, different folks, different strokes. (I take for granted you are experienced enough to understand the options aren't locked in, one can roll them at any time.)
As far as today goes, I told you at the start that I hadn't locked in the ones you quoted me on.... at this exact moment, I've captured all but 20 cents of this move, and all the while had the 3.4% in my pocket if the stock had stayed flat.
Sorry, James. While you are eventually going to be correct on this stock, the eventually part is starting to eat at your ROR. At least to the point where I don't think you can make the argument that buy and hold is the ONLY way to go.
Buy and Hold with TEX is going to make great money. But so can trading it, and so can covered writes.
It is all perspective and when you pick the starting day. Since May 2011 the stock may be be flat but its up 100% this year. So buying when it goes down is far more lucrative then the call strategy.
So you wrote real trade but it isn't? So what was your exact trade then.
I am just pointing our the flaw in selling calls. You hold and own a stock for it to go up. Selling covered calls caps your upside and barely limits your downside for a locked in premium.
My point was why invest in a company if you're going to bet every month its going to be flat. If it goes down you share in all the downside save the premium you saved and if it goes up you lose the money you could have made. To me selling covered calls in this case isn't good. Obviously Ill go case by case since sometimes the premium may be large enough to warrant. 3.4% isn't enough.
It is all perspective. since may 2011 it may be flat but its up 100% this year. So buying when it goes down us far lucrative.
So you wrote real trade but it isn't? So what was your exact trade then. My point was why investthen cap yyour gains nut barely limit your downside. Its silly to me. The 3% is an illusion since it will move enough times that it makes it unprofitable.
Its not buy and hold its buy hold and buy some more