►► AVAILABLE NOW! Limited to the FIRST 100 people, get my brand new online Option Trading course (Intermediate option trading) for $497. Regular price is $997. Here is the link to check it out: mylifeoflearning-randy.mykajabi.com/offers/EgeavtWJ Subscribe to this Channel: ua-cam.com/channels/eUPN22CHOgoDTZ4QfOjxHw.html Join my PATREON and get access to my WEEKLY TOP 5 STOCKS, DAILY TRADES & more Awesome Extras: www.patreon.com/mylifeoflearning New Beginnings: The Option Trading Story amzn.to/2OgXx58 Facebook: facebook.com/jamiston.queens.5 Website: mylifeoflearning.com/index.html
I'm not able to follow your spreadsheet at 12:00. Maybe it's too simplistic because shouldn't there be an offset for the difference? I'm very new to the Covered Call Options trading so its probably just a rookie thing.
That's the actual screenshot from the order that was executed on my brokerage. It cost $0.03 per share to buy to close the August covered call but we received $0.65 per share to sell the September covered call. So I walked away with a net of $0.62 per share (minus commission) for rolling that covered call. If your newer to covered calls, I think this video playlist will help you out: ua-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html If you're really new to options, this video will help you out: ua-cam.com/video/bKLxEY3BolY/v-deo.html
@@StockandOptionMyLifeOfLearning Ahhhh that makes sense. I really appreciate the videos and the links you provide. I've traded stocks for 30 years but never cover calls. I'm taking my time before I get into it to establish a repeatable strategy depending upon the conditions - do I want to continue to own it or do I not care and just let it expire. Things like that to be able to comfortably execute a strategy depending on the circumstance. Thank you very much helping me. I really appreciate it.
Very detailed video on covered call scenarios! This is what I have been looking for. Your videos are excellent and I have subscribed to your channel. :)
I'm not sure exactly which part of the video you're referring to, but by selling an additional put option, it puts extra cash into our pocket which will lower our overall out-of-pocket cost on the covered position. If you give me a timestamp, I can answer more accurately.
@@StockandOptionMyLifeOfLearning time stamp 17:30 onwards. Want to understand reason of write put in this case of cover-call trade. (In addition did I hear correctly that you said you don’t have enough 100 shares of GPC or I misunderstood?)
In that scenario, I wanted to stay in the covered call position, but the call option had gone deep in the money, so the stock was going to called away from us if we didn't do something about it. So I sold a new cash secured put option, because I had position sizing available, and used that cash to roll the covered call strike price up as I also rolled it out. We owned 100 shares of GPC and had position sizing available to own 200 shares if it if that new cash secured put option was assigned to us.
So on your OZK and XOM examples you are selling calls below your break even price and just watching them closely as to not let them go ITM or deep ITM?
If you give me a timestamp, I can answer your question exactly. But generally speaking, if a stock has moved against me in a pretty big way, I am willing to sell call options below the price where I was assigned at. I prefer to do that when I have extra position sizing available so if need be, I can sell additional cash secured put options to help roll that covered call strike price back up if CC goes ITM and I don't want to sell the stock at that lower CC price.
What really confuses me about options is figuring out what the numbers mean on the order charts. Do you have a video explaining charts like the one @7:07 and @10:32?
I don’t have a video just on that however that’s actually showing our positions. Where it says position, in that column, if there’s a negative in that column, it means that we are short that position or have sold it. If there was no “-“ sign in front of the number, then it’s assumed it’s a positive number and it means that we own or are long that position. The market value column tells you what the broker is estimating that position is currently worth. The market price is what the broker is saying is the current price being traded per share for that option contract or stock. And the average price is how much we were paid for that position per share if we sold it short or it’s how much it cost us per share if we bought it.
Generally you also want to be comfortable if the covered calls were assigned at the CC strike price. There are ways to usually avoid assignment but if a stock has a huge run up, it's typically best to let it be called away if you can handle the tax consequence. And yes, selling puts is typically at a strike you'd be comfortable buying the shares at. If you're new to option trading this video series will help: ua-cam.com/play/PL3j38I2YtGw1ajwTN6SxDkMN0yqEaYsGG.html
I am very knew to covered call options and “wheel” strategies and rolling options. I am trying to wrap my head around all this new information to see how to maximize my cash flow. I’m trying to educate my self to be sure I make educate decisions in making these calls and or puts it rolls
That's very smart of you to educate yourself as much as possible before doing it. Here is a whole video series dedicated to covered calls that will help: ua-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html And here's one dedicated to the wheel strategy: ua-cam.com/play/PL3j38I2YtGw2DJsqiZnE4hx2jzsizcyRy.html
I am currently using Interactive Brokers and ETrade. Of those two, I prefer Interactive Brokers (www.interactivebrokers.com/en/index.php?f=1338) for trading options and ETrade for buying stock outright.
Would you sell a covered call that is below your average price? I have a situation that the stock tank close to 50% and selling covered call does not provide any premium since it is too far from the current price. Is this a risk I should take? Please advise!
In certain situations I feel comfortable doing that. If I’m considering doing that then I want the call to be at or above strong resistance. Just keep in mind that there’s always the possibility that the stock goes past your short call so you’d want to have a plan on what you will do if that happens.
@@StockandOptionMyLifeOfLearning I am thinking to sell a short call and monitor price closely, Since I am selling the strike way under my average , I definitely cannot let the shares to be called away. If the stock price is approaching the strike, . I will roll call to a further date and up the strike price to another strong resistance and still able to receive some premium to avoid my shares to be called away. I think that would be my action plan. Hopefully it will work out to repair my bad trade 😞
Hi Randy! For a put where the underlying is declining, how do you decide if you should roll the position or allow assignment and then sell covered calls?
Hey Jim my answer to the question is specific to each individual position. For example, if it looks like the decline might continue, then I would definitely prefer rolling the cash secured put option down to improve our possible entry price. However, if it looks like the decline might be ending, then it becomes a question of which one gives us the best return. One thing we're now having to take into consideration is the interest were being paid on our cash. If we have sold a cash secured puts option, while that cash is sitting there, the broker is paying us interest on that money whereas before about six or nine months ago, we weren't getting paid any interest. But now that we're getting paid interest, that needs to be figured into the equation. But we compare rolling the cash secured put option out with letting it be assigned to us and turning it into a covered call and if it's a dividend paying stock, also collecting the dividend. Here's a video that you might find helpful on that suject: ua-cam.com/video/6AW3fw_bH2A/v-deo.html
is there any strategies while you sell your CC you add a sell naked put contract simultaneously? the trike price for CC and short put are different , if by expiration the stock price is between the strike price of your CC(87.5) and short put (90), you will be assigned the short put and keep your CC , is this what you intend to do so? why don't you put the same strike price for both call and put options? thank you!
If I am not at a full position in a company and has gone against me, then I will sell additional put options up to four positions size if they were all assigned to me. I made a really detailed video of a PMCC position that I've been in for about a year and a half and which I'm doing something similar to what you described. If you haven't seen it already would like to check it out here's the link: ua-cam.com/video/kHVQ7VpX4WA/v-deo.html My basic rules are that I will not sell any additional puts if I'm already at a full position size, and if I'm trying to roll my short call options strike price up, then my goal is to sell a put and when you combine that cash with the cash I'd received by rolling the call option up and out, I'd like to do it for a credit. With the short strike prices, I'd like the call options to be right at or just above resistance and put options to be right below or right at support. That's ideal. But sometimes we can't do that for the best return with the shortest expiration. Speaking of time period, I am willing to consider going out 2 months instead of my preferred one month if need be. On very few occasions, I may even consider going out 3+ months but that doesn't happen very often and I try to avoid having to do that.
Hey Elie, sure you can email me at: rpproperties1@aol.com For more information, here is a helpful UA-cam video as well: ua-cam.com/video/Ve_P62GhX1M/v-deo.html
Hey Felipe thank you for your question and support! That's probably a question best answered by your tax preparer or broker. I don't want to give you my thoughts because I'm not 100% sure on that.
No I have not found out the answer to that question yet. I would encourage you to check a local tax professional because I definitely do not fit that criteria. I plan to ask mine when I meet with them in a few months but the state and countrys tax laws I’m in maybe differ from the tax laws where you are at.
Hi , I opened a leap option recently and then did a PMCC on it. The stock price rose rapidly the first few days and is just a few dollars from the strike price of my covered call. At what point do I roll up? The exp on my covered call is July 1. Do I wait and see what happens in June, since we are not at exp yet? Thanks!
Hey James there’s a lot that goes into answering that question. Typically when that happens to me, the first thing I look at is, is the stock approaching an area that might serve as resistance for it which would suppress possible upward moves or maybe even cause the stock to retrace. Is the volume increasing as a stock has been rising or is it starting to decrease reflecting a slowing upward momentum? If momentum appears to be strong so that odds are it will continue going up, then I would consider rolling it up and out. If however the momentum is fading, generally, I wait and see what happens to it around that resistance area. Here’s a video that you might find helpful on that subject: ua-cam.com/video/g0sEaN8-f4o/v-deo.html And here is a video series I made on PMCC‘s: ua-cam.com/play/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7.html
Your suggestion to roll up and over to avoid getting called away is good. But I think that decision ought to be made in balance with opportunity cost. While you do get some premiums for the roll, you are missing out before expiration. I trade weekly options. So to roll a covered call further many weeks over might make me miss out on other potential premiums Perhaps another consideration is to roll up and over 50% of the position. Let the other 50% expire thus free up money to start with a new position of the same or other stock.
I agree. There is more consider than just if you have the ability to roll it up and out. You’d want to consider the overall big picture: how the stock is looking and performing from a technical aspect, and other potential opportunities. A trader also needs to consider their personal goals. Once a high-level picture is completely understood, then the best decision can be made.
I am willing to roll a CC strike down when a stock I have been assigned is looking pretty bearish. It'll give you more cash flow to help offset the decline in price. and offer more protection if the stock continues to decline. You'll just need to keep an eye on the underlying stock to make sure it ends up getting called away from you at a price you'd happy/OK with.
The technique in the last segment on GPC of rolling up your short put might be the answer to my DITM AAPL covered call dilemma. Question: the new short put strike appears to be higher than the new covered call strike, is this effectively now an inverted covered strangle? I have been doing covered strangles and using the put premiums to help pay for my rolling the call strike up, but I have yet to select a put strike that is higher than the call strike! Assuming this increases the likelihood you will be assigned the shares, are you willing to take on more shares at such a high price if the stock were to have a reversal to the downside? Would you still deploy this method on an underlying that has become overbought on RSI and that you suspected might be due for a pullback, or would you hold off on raising that put strike in that case? Just upgraded my tier to the highest level because your content is so good, would love to touch base on Discord regarding this at some point.
Those are great questions! I always prefer to sell that CSP at or just below support. Although it might be higher than the covered call strike price, it should still be around a support area. I'm also willing to go farther out in time if it seems in our best interest to be able to sell a lower CSP strike price. I always look at various expiration days and strike prices as well as how the technicals are looking on the daily and weekly charts to help me decide which options to sell. In all cases, if I'm selling a CSP at a strike price above or below my covered call (PMCC) strike price, it's because I have position sizing available to add the position if it comes to that. If I don't have position sizing available, I won't do it.
Very profitable swing trader but recently began adding covered calls from my positions. Love your videos and video style, where have you been in my life? LOL
Price of stock ABC is $10 when I sell a $15 call contract, just before expiration stock jumps to $25. Would you roll up and out if you're bullish about the stock? Also, if you roll it, would you keep any profit between the old $15 strike price and new strike price? Thank you
Hey Miguel that’s a great situation to be in. If I’m long term bullish on a stock, and it performs like your example, I will try to roll the CC up and out if I can do that for a good enough return. My goal is to always roll options for a credit if at all possible. If you haven’t seen it already, you might like to check this video out on rolling CC including ones that are DITM: ua-cam.com/video/cwoqR5fNHkA/v-deo.html
Wow what your said is that I’m dumb 😭😪😭I have so many stocks that I bought higher that what is trading now ,I was thinking about cover calls but I was afraid 😱 to loss my stocks at less money that what I bought them, so rolling over is the solution But is better to sell to the 3 Friday of the month
Another great video! Why do you sell covered call and put at the same price of $82.50 ? What's the logic, just to collect more money? But you are prepared to buy GPC at $82.50 if it drops?? Another question: When you roll covered call to $87.50 and put to $90, the covered call is till ITM (stock price at around $94 when you roll it), it is quite a risky move cos the ITM covered call has a higher chance of assignment? Thanks for great sharing and your time!
Yes it does put more money in our pocket but if we sell a cash secured put option, we are always ready to have those shares assigned to us if that’s what it comes to. It also means that we don’t have a full position size in it already. I guess a position being risky is really in the eyes of the beholder. But yes the farther in the money an option is, if you’re short the option, the greater your risk of assignment is, especially when there’s no time value left in the option. So if you don’t really want the option assigned, then it could be considered more risky. However if you don’t care if it’s assigned, then it actually might be less risky if it’s a CC.
Hey great video! If you have sold a covered call option at a strike below your assigned price (ie, strike: $50; assigned price:$70), and current stock price is ATM (ie, $51), and you are 2 weeks away from expiration, would you be willing to wait until 2 days before expiration (when the option price tanks) to execute a more profitable rollover?? If you wouldn't wait that long, please explain why you wouldn't wait. Thanks so much sharing!
Hey Diego thank you for your question and support! For me, it depends on a couple factors. One of the biggest ones that I consider is if I'm OK if the stock got called away from me at that strike price. If that does not matter to me one way or another, but say I'd prefer that it does not get called away so I can keep rolling my short covered call up, then I look at if the stock is hitting up against some resistance. If it is, then it's possible that it will take some time if the stock is able to push through that resistance. That may take the two weeks that you were referring to, so we'd be able to let the time value dissipate, and have a roll order sitting out there to roll it up. Either way I'd probably go ahead and place a limit roll order in case something happened with the stock and it moved around briefly very fast so that the order got filled. If I did not want the stock called away from me, then once the time value portion of the option was under $0.20 =/-, at that point I would really begin to look through all the options so it wouldn't be called away from me. You do have to keep an eye out for someone doing dividend capture. For example, if the stock was about to go ex dividend, you want to make sure there's at least the value of that dividend in time value of the option otherwise the stock might be called away from you for dividend capture.
Hey. Just found your channel today and Ive been bindge watching everything. I seriously needed help with options, and rolling. My AMC stock took off on me today and I didnt want to lose my shares, so I did a roll, but since I am experienced, I wound up taking a very low price (51) for end of next week, but I expect it to be 60 to 70 by then. Is my only option to RE-ROLL it and put it another week out (if it continues to climb i will be stuck in the same postition this time next week)? Also, how do you write a put option if you dont have 100 shares (you said to write puts if you dont have a full position) I thought you needed to own 100 shares of any stock to do a covered call? Thanks
Thank you so much for your support! That will be a big jump! If you want to try and stay ahead of the price increases, you might consider rolling it out to an expiration day farther than just a week. If you were long-term bullish on it, you might consider the monthlies or even something that's two or three months out. Here are a few more videos on rolling call options you might find helpful if you haven't seen them already: ua-cam.com/video/kHVQ7VpX4WA/v-deo.html and ua-cam.com/video/cwoqR5fNHkA/v-deo.html When you write a put option, you don't have to own the stock. A put option allows the buyer to put stock into your account. If however you are writing a call option, if you have the 100 shares in your account for each one contract, then it will be called a covered call. If you don't have enough shares to cover the call option contracts you've written, then those uncovered call options are naked options.
This is hilarious. Same reason I am here. I have a 40 covered call that expires Friday. I like the idea of selling the put when rolling the cc but I need to understand the downside. This is a short strangle but a short strangle usually has the put at the same or lower than the call strike price. In your example, what happens if the stock does below the put but above the call strike? what if it closes above both or below both?
If the Stock closes below the strike price of the put option you sold, if you don't roll it out and maybe down then it will be assigned to you. If the call option closes ITM, and you don't do anything to roll it out before it's assigned, then that stock will be called away from you. So if you're covered call was ITM and you're short put option was ITM, if you are doing equal number of contracts for both, then the call option would call your stock away and the put option would put shares right back into your account.
@@StockandOptionMyLifeOfLearning This is golden. I wonder what the margin requirement is for that setup. I have a deep in the money covered call I wrote for 35, the stock is at 45 right now. I want to roll it 2-3 months down and up to at least 45, maybe even 50 and then sell the 55 or 60 put for the same expiration date. If it blows up and the call is ITM but the put is OTM, like if it closes at 61. I still get called away, but the put would be OTM so I would just keep that premium. Theoretically I could keep rolling both and then eventually just buy back one or the other. Did I get that right?
Hey Robert if it's done in the same stock and preferably at the same time then yes that's exactly right, it's considered a roll. You're buying to close the one that's nearer to expiration and selling to open another one to replace it that's farther out in expiration.
I'm sorry to hear that. Do you know what is the root cause for the account decline? Are the stocks you are selling covered calls on going down in value? Are you selling strike prices that are lower than where you bought the stock at?
Great video as always! But could you talk more about the strategy that sets an order out there and see if it gets hit? I want to learn more about it. Thanks!
Thank you for that. You might want to check out our monthly cash flow series of videos because in those videos I talk about two or three trades including why we did the trade or how we went about trying to fix it: ua-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html Here are several more videos about technical indicators we use to enter new positions: ua-cam.com/video/PPS5TcCYMvE/v-deo.html and ua-cam.com/video/Ub9u7fZ0Lag/v-deo.html and ua-cam.com/video/9L8avDcF664/v-deo.html and ua-cam.com/video/AC62LCzApJg/v-deo.html
Hi, in your experience, does rolling covered call cause a wash sale? For example, if i sell covered calls weekly, then BTC to avoid assignment at a loss before end of week 1, then STO to week 2 and ends up making a profit in week 2, does week 1 loss violate wash rule or does wash rule not apply to premiums?
Hey Frank thank you for the question and your support! I I am not an accountant so I don't want to tell you what I believe is 95% right because I'm not 100% sure. I would suggest asking the person that handles your taxes. Each case could be different also depending on if you're considered a full-time option and stock trader or if it's a side job. I want to make sure whatever answer you get is 100% correct.
No, not yet. I plan to meet with my accountant in the next month or two. I’ll try to remember to ask him for future reference. But each state or country could be different so I would encourage you to check with a tax professional in your state and country.
Randy, love your videos. Could you do a video on how you put orders into IB for future roll orders, ie if the market moves it will be filled automatically.
If you were hoping to hold onto the stock then I would put a roll out there to roll that strike price up $5 to $155 and try and walk away with a small credit on top of that. It looks like JNJ is in a pretty good up trend and there's a lot of buying pressure in the daily and weekly volumes. Right now, as long as nothing changes, JNJ looks like it's heading up even though it is about to test his previous high. But the charts look bullish to me!
I am not a tax professional so to get a 100% accurate answer, you should probably consult with one. However, to the best of my knowledge, it's pretty much the same thing as long as you're within the 30 day wash sale rule. Here's a video on that subject if you'd like to check it out: ua-cam.com/video/xdcQCKZtJhI/v-deo.html
How do you keep track of your roll? I feel like when I buy back at a loss, even though I sell another one for a credit, I still realized a loss on the one I closed. Hope that make sense
@@StockandOptionMyLifeOfLearning bro but are you gonna answer it? lol also i’m 5 minutes into the video but you didn’t explain what it means to roll a covered call option. this is my first time hearing about it and based on the video i think it means reselling another call option? or something
I believe I understand what you're asking here, if you buy it back at a loss then of course you did lose money on that leg. However if you simultaneously sell a new one in which you pocket more by selling the new one than the old one cost to buy back then in the overall position you could still be up. Personally, I keep track of the P&L of each position in an excel spreadsheet. Does that answer your question?
Thanks for pointing out that I failed to answer the question. 🙃 I try to respond to every question and comment and somehow I didn't respond properly to Sellers Lead's question which was a good one. To roll an option means that, if you sold an option to open a position, say for example last month, and it's now about to expire (so you want to close it out), then you'd buy the option back to close it and simultaneously sell to open a new option that expires next (or at a later) month. So yes you are correct. To roll (in this example) means you're buying to close the old one and as you mentioned, you're selling a new later month call option to open. Does that answer your question?
Your position in OXY is similar to my Exxon Mobil position. It's reaching a previous low around $9 a share so there's the possibility that it could hit that and bounce for you but of course there are no guarantees. A lot of oil and gas Companies are getting hit pretty hard right now. If it were me, I'd try to sell my next call option around some sort of resistance and maybe also at or above a moving average. I'm not sure what your goal is with the stock, to hold onto it, or what your entry point was, so not knowing that I would probably look to sell the November $14 call option. It generates a decent cash on cash return and is right at the 50 day moving average. In order to get there it would have to work its way through a little bit of potential resistance around the $12 50 price as well. You could also just place a call order out there at a higher premium and maybe higher strike to see if it gets hit over the next week or two if there happens to be a bounce in oil. That's just my personal opinion not my suggestion Robert. Hopefully it gives you an idea of my thought process on a position like that.
I've been working with the options wheel since late 2020, this options Roll for covered calls is extremely useful, and my new way to make more gains. This video was spectacular with the explanations and examples.
Do you ever sell covered calls below your cost basis because the stock has lost so much value with the idea that you will monitor the call you sold short and adjust if you see it working against you?
Hey Joseph absolutely! I especially do that if my cost basis is at or below what the stock is currently trading at. That way I wouldn’t feel too bad if it was called away from me. I made a playlist on how to repair option positions That have gone against you. If you’d like to check it out here’s the link to that video series: ua-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
I don't understand the concept why are you selling puts and covered call at the same time with different strike price? Did you want your shares to be called away and put back your shares with your short put options? I got assigned with NIO back in mid February with strike at $52. I have been selling covered call to bring my average cost down. I do like to own NIO for the long term. Thanks for your advice about rolling covered call, I have 6 contracts with nio at $45 expiring June 18.
Hey Giang thank you for your questions and support! I’m not sure exactly which trade/position you’re referring to. If you have a specific part of the video in mind can you please send the timestamp? Overall though if we have a covered call position and we are selling puts on that same stock, either we are willing to add to the covered call position if the put got assigned to us or we are trying to use cash from selling the additional put option to roll the covered call strike price up. A third scenario might be if our put option is deep in the money and we are trying to generate additional cash by signing a call option that’s OTM.
@@StockandOptionMyLifeOfLearning thanks for your response, I rolled up my CC from $45 to $50 into July 2nd. Since I closed my CC for a lost of $1k and gained back $800. This still better than having 600 shares called away. If I get assigned by July 2nd I'm ok with my shares called away. I gained almost $3k by rolling my strike up. Thanks again for that advice about rolling cc, looks like NIO is on the move golden crossing coming. Will start selling puts again on NIO.
Best content on internet.I have 30k account with IBR.Rolling positions is very expensive on this platform ,hence l let my covered calls run to expiration($30/transaction).? Also another question.What method do you use to tabulate all your transactions you show in your videos.Thanks Randy
Hey James thank you so much for that and for your support! 😊 That is a pretty hefty transaction fee! If you're located in the US you can definitely find another brokerage that will do better than that. If you're outside the US, I've heard it can be a challenge. Hopefully, international competition will get those transaction cost pushed down. To keep track of my trades, I use simple Excel spreadsheets.
i have 800 share of $AI stock. bought $21 got down to $12 and i seel call for 8 options strike $15 now i down 400% for sell call lost $8 thousand expr 2025 but stock up i profits $4000 but lost on sell call should i roll my options i don’t know i make mistakes. 😢
Mistakes are just a part of learning. Check out these videos, they might give you some ideas on how to fix the position: ua-cam.com/video/aK-nPXZ1hAA/v-deo.html and maybe this one as well: ua-cam.com/video/kHVQ7VpX4WA/v-deo.html
Just an example, if you buy xom at $70, stock drops to $45, you sell covered call at $50, if the position gets exercised at $50, wouldn’t you lose $2000 per contract for the 100 shares? Isn’t rolling down a covered call increase your loss potential?
I believe I understand what you're asking here. If you bought XOM for $70 per share, sold the $50 covered call option and then it was called away from you at $50 per share and you had no other trades or income from that position then you would lose $20 per share. However if you look at the overall position, let's say you've been rolling those covered calls for 6 to 12 months and you've also been receiving dividends, then your loss on the overall position wouldn't be as much because you would've been generating income by collecting the dividends and selling/rolling those options. Does that answer your question?
"if the position gets exercised at $50, wouldn’t you lose $2000" Yes, that is what would happen if you let it get exercised at $50. Selling a strike price BELOW your purchase price increases your loss potential. DON'T let it expire below your purchase price. On expiration day, 30 minutes before the closing bell, buy to close the $50 call strike, and simultaneously sell to open another call at a further out of the money strike, at a further out in time expiration, to earn a net credit. NEVER ROLL FOR A NET LOSS. ALWAYS ROLL FOR A NET CREDIT. Anytime you sell a covered call with a strike that is BELOW your purchase price (which I don't even recommend doing), you cannot set it and forget it like you can when you sell a call with a strike that is ABOVE your purchase price. You need to babysit the trade and keep rolling on each expiration day, until the strike is above your purchase price. In the example you made of buying XOM at $70, and the stock drops to $45, you may want to consider selling an out of the money cash secured put with a strike of $40, IF you have the cash to do it. You collect better premium without the risk of being assigned by a $50 call, and if XOM drops below $40 by expiration, then you can roll the put lower again if you want, to an out of the money strike, with a further out in time expiration to earn more premium, while waiting for XOM to recover in price. This also allows you to lower your cost average on your stock, if you choose to get assigned another 100 shares at $40. $70+$40=$110/2=$55 per share on 200 shares. XOM will recover to $55 sooner than to $70. If you have deep pockets you could sell 2 cash secured puts with a $40 strike to double the premium and to get assigned 200 shares at $40 and lower your cost average down to $50. You might be able to get decent premium on 3 covered calls with a $50 strike even if the market price is $40. AND you earn dividends on 300 shares in the mean time. Knowledge IS power, only IF you apply that knowledge.
Hey Alfredo that amount has been increasing as I've sold off some real estate over the past several years. I made a monthly video series showing exactly how much cash we generated and the amount of capital we had set aside for those trades. If you'd like to check it out, here's the link: ua-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html
Thank you for your comment and support. I sell call options generally, on stock that I already owned. So if if it's called away from me, I'm totally fine with that. Every once in a while I'll sell two call options against one long position like I talk through in my LEAP option video. That is more risky especially for someone newer to option trading. I sell put options when I'm willing to have the stock put into my account. So for me personally, it's not so risky because I'm getting paid while I wait for the stock to be put into my account at a price that I'd be happy buying it up.
I think I still own it in my outright stock ownership account, in which I buy stocks I plan to hold forever. But I’m not still trading it in my option trading account right now.
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Thanks for infos !
Thank you for your support!
I'm not able to follow your spreadsheet at 12:00. Maybe it's too simplistic because shouldn't there be an offset for the difference? I'm very new to the Covered Call Options trading so its probably just a rookie thing.
That's the actual screenshot from the order that was executed on my brokerage. It cost $0.03 per share to buy to close the August covered call but we received $0.65 per share to sell the September covered call. So I walked away with a net of $0.62 per share (minus commission) for rolling that covered call.
If your newer to covered calls, I think this video playlist will help you out: ua-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html
If you're really new to options, this video will help you out: ua-cam.com/video/bKLxEY3BolY/v-deo.html
@@StockandOptionMyLifeOfLearning Ahhhh that makes sense. I really appreciate the videos and the links you provide. I've traded stocks for 30 years but never cover calls. I'm taking my time before I get into it to establish a repeatable strategy depending upon the conditions - do I want to continue to own it or do I not care and just let it expire. Things like that to be able to comfortably execute a strategy depending on the circumstance. Thank you very much helping me. I really appreciate it.
Very detailed video on covered call scenarios! This is what I have been looking for. Your videos are excellent and I have subscribed to your channel. :)
Thank you!
Likewise here. Thank you for sharing.
You are the best Man..
@StockandOptionMyLifeOfLearning, on the GPC case, how does selling the put helps to protect/"compensate' if your stock is called away.
I'm not sure exactly which part of the video you're referring to, but by selling an additional put option, it puts extra cash into our pocket which will lower our overall out-of-pocket cost on the covered position. If you give me a timestamp, I can answer more accurately.
@@StockandOptionMyLifeOfLearning time stamp 17:30 onwards. Want to understand reason of write put in this case of cover-call trade. (In addition did I hear correctly that you said you don’t have enough 100 shares of GPC or I misunderstood?)
In that scenario, I wanted to stay in the covered call position, but the call option had gone deep in the money, so the stock was going to called away from us if we didn't do something about it. So I sold a new cash secured put option, because I had position sizing available, and used that cash to roll the covered call strike price up as I also rolled it out. We owned 100 shares of GPC and had position sizing available to own 200 shares if it if that new cash secured put option was assigned to us.
Just subscribed , thank you for the content
Thank you for your support!
Thank you for the education! Will try to apply this in some of my covered calls:)
Thank you for your feedback! I'm happy that you find it helpful.
Is there also covered putt options?
Absolutely! It's just the opposite of a covered call.
So on your OZK and XOM examples you are selling calls below your break even price and just watching them closely as to not let them go ITM or deep ITM?
If you give me a timestamp, I can answer your question exactly. But generally speaking, if a stock has moved against me in a pretty big way, I am willing to sell call options below the price where I was assigned at. I prefer to do that when I have extra position sizing available so if need be, I can sell additional cash secured put options to help roll that covered call strike price back up if CC goes ITM and I don't want to sell the stock at that lower CC price.
What really confuses me about options is figuring out what the numbers mean on the order charts. Do you have a video explaining charts like the one @7:07 and @10:32?
I don’t have a video just on that however that’s actually showing our positions. Where it says position, in that column, if there’s a negative in that column, it means that we are short that position or have sold it. If there was no “-“ sign in front of the number, then it’s assumed it’s a positive number and it means that we own or are long that position.
The market value column tells you what the broker is estimating that position is currently worth.
The market price is what the broker is saying is the current price being traded per share for that option contract or stock.
And the average price is how much we were paid for that position per share if we sold it short or it’s how much it cost us per share if we bought it.
@@StockandOptionMyLifeOfLearning thanks v confusing I wish you could explain that in a video. I have positions and can't tell if I am up or down.
I'll see if I can work that into future videos. It can be confusing.
Selling fovered calls is when you own the shares and collect premiums. Selling puts is when you want to own the shares at w certwin price right?
Generally you also want to be comfortable if the covered calls were assigned at the CC strike price. There are ways to usually avoid assignment but if a stock has a huge run up, it's typically best to let it be called away if you can handle the tax consequence. And yes, selling puts is typically at a strike you'd be comfortable buying the shares at.
If you're new to option trading this video series will help: ua-cam.com/play/PL3j38I2YtGw1ajwTN6SxDkMN0yqEaYsGG.html
@@StockandOptionMyLifeOfLearning what's a good way to contact you to ask some questions?
My email is: rpproperties1@aol.com
Whenever I try to roll my itm call option up and out, I can't seem to roll for a credit unless I roll out like a year. What am I doing wrong??
If it’s far ITM, it can be difficult to roll for any decent credit amount.
awesome strategy. love your video 🤗
Thank you so much for your support Jeff! I really appreciate you. 😊
I am very knew to covered call options and “wheel” strategies and rolling options. I am trying to wrap my head around all this new information to see how to maximize my cash flow. I’m trying to educate my self to be sure I make educate decisions in making these calls and or puts it rolls
That's very smart of you to educate yourself as much as possible before doing it. Here is a whole video series dedicated to covered calls that will help: ua-cam.com/play/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K.html
And here's one dedicated to the wheel strategy: ua-cam.com/play/PL3j38I2YtGw2DJsqiZnE4hx2jzsizcyRy.html
I'm just learning about options so thanks for the education
Thank you for that Marc and for your support!
Which trading platform do you prefer?
I am currently using Interactive Brokers and ETrade. Of those two, I prefer Interactive Brokers (www.interactivebrokers.com/en/index.php?f=1338) for trading options and ETrade for buying stock outright.
Thanks.
Would you sell a covered call that is below your average price? I have a situation that the stock tank close to 50% and selling covered call does not provide any premium since it is too far from the current price. Is this a risk I should take? Please advise!
In certain situations I feel comfortable doing that. If I’m considering doing that then I want the call to be at or above strong resistance. Just keep in mind that there’s always the possibility that the stock goes past your short call so you’d want to have a plan on what you will do if that happens.
@@StockandOptionMyLifeOfLearning I am thinking to sell a short call and monitor price closely, Since I am selling the strike way under my average , I definitely cannot let the shares to be called away. If the stock price is approaching the strike, . I will roll call to a further date and up the strike price to another strong resistance and still able to receive some premium to avoid my shares to be called away. I think that would be my action plan. Hopefully it will work out to repair my bad trade 😞
It sounds like a good game plan. Let me know how it turns out.
Hi Randy! For a put where the underlying is declining, how do you decide if you should roll the position or allow assignment and then sell covered calls?
Hey Jim my answer to the question is specific to each individual position. For example, if it looks like the decline might continue, then I would definitely prefer rolling the cash secured put option down to improve our possible entry price. However, if it looks like the decline might be ending, then it becomes a question of which one gives us the best return.
One thing we're now having to take into consideration is the interest were being paid on our cash. If we have sold a cash secured puts option, while that cash is sitting there, the broker is paying us interest on that money whereas before about six or nine months ago, we weren't getting paid any interest. But now that we're getting paid interest, that needs to be figured into the equation. But we compare rolling the cash secured put option out with letting it be assigned to us and turning it into a covered call and if it's a dividend paying stock, also collecting the dividend. Here's a video that you might find helpful on that suject: ua-cam.com/video/6AW3fw_bH2A/v-deo.html
@@StockandOptionMyLifeOfLearning you're the BEST Randy thank you very much!!!
Excellent video!
Thank you for your support!
is there any strategies while you sell your CC you add a sell naked put contract simultaneously? the trike price for CC and short put are different , if by expiration the stock price is between the strike price of your CC(87.5) and short put (90), you will be assigned the short put and keep your CC , is this what you intend to do so? why don't you put the same strike price for both call and put options? thank you!
If I am not at a full position in a company and has gone against me, then I will sell additional put options up to four positions size if they were all assigned to me. I made a really detailed video of a PMCC position that I've been in for about a year and a half and which I'm doing something similar to what you described. If you haven't seen it already would like to check it out here's the link: ua-cam.com/video/kHVQ7VpX4WA/v-deo.html
My basic rules are that I will not sell any additional puts if I'm already at a full position size, and if I'm trying to roll my short call options strike price up, then my goal is to sell a put and when you combine that cash with the cash I'd received by rolling the call option up and out, I'd like to do it for a credit. With the short strike prices, I'd like the call options to be right at or just above resistance and put options to be right below or right at support. That's ideal. But sometimes we can't do that for the best return with the shortest expiration.
Speaking of time period, I am willing to consider going out 2 months instead of my preferred one month if need be. On very few occasions, I may even consider going out 3+ months but that doesn't happen very often and I try to avoid having to do that.
@@StockandOptionMyLifeOfLearning Thank you for your reply!
Is there a place to contact you to ask questions before joining your patron so I can see if it’s for me
Hey Elie, sure you can email me at: rpproperties1@aol.com For more information, here is a helpful UA-cam video as well: ua-cam.com/video/Ve_P62GhX1M/v-deo.html
Why do you use "cost basis" to determine rate of return? shouldn't it be current market value?
It could be run either way. I prefer ROC invested or return on cost basis. But either way works. 👍
Any problems with wash sales with rolling covered calls?
Hey Felipe thank you for your question and support! That's probably a question best answered by your tax preparer or broker. I don't want to give you my thoughts because I'm not 100% sure on that.
I have the same question. Did you find out the answer?
No I have not found out the answer to that question yet. I would encourage you to check a local tax professional because I definitely do not fit that criteria. I plan to ask mine when I meet with them in a few months but the state and countrys tax laws I’m in maybe differ from the tax laws where you are at.
Hi , I opened a leap option recently and then did a PMCC on it. The stock price rose rapidly the first few days and is just a few dollars from the strike price of my covered call. At what point do I roll up? The exp on my covered call is July 1. Do I wait and see what happens in June, since we are not at exp yet? Thanks!
Hey James there’s a lot that goes into answering that question. Typically when that happens to me, the first thing I look at is, is the stock approaching an area that might serve as resistance for it which would suppress possible upward moves or maybe even cause the stock to retrace.
Is the volume increasing as a stock has been rising or is it starting to decrease reflecting a slowing upward momentum? If momentum appears to be strong so that odds are it will continue going up, then I would consider rolling it up and out. If however the momentum is fading, generally, I wait and see what happens to it around that resistance area.
Here’s a video that you might find helpful on that subject: ua-cam.com/video/g0sEaN8-f4o/v-deo.html
And here is a video series I made on PMCC‘s: ua-cam.com/play/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7.html
Excellent video sir and loved it. Socially deep in the money covered call and adjustments rolling up. I am going to try it. Thanks again
Thank you for that and for your support! I really appreciate it.
Your suggestion to roll up and over to avoid getting called away is good.
But I think that decision ought to be made in balance with opportunity cost. While you do get some premiums for the roll, you are missing out before expiration. I trade weekly options. So to roll a covered call further many weeks over might make me miss out on other potential premiums Perhaps another consideration is to roll up and over 50% of the position. Let the other 50% expire thus free up money to start with a new position of the same or other stock.
I agree. There is more consider than just if you have the ability to roll it up and out. You’d want to consider the overall big picture: how the stock is looking and performing from a technical aspect, and other potential opportunities. A trader also needs to consider their personal goals. Once a high-level picture is completely understood, then the best decision can be made.
Thank you Kindly 😊
Thank you for your support Ram!
If you roll forward on a losing position you're losing equity . If you roll forward to a deeper ITM Call Option can you protect your equity loss?
I am willing to roll a CC strike down when a stock I have been assigned is looking pretty bearish. It'll give you more cash flow to help offset the decline in price. and offer more protection if the stock continues to decline. You'll just need to keep an eye on the underlying stock to make sure it ends up getting called away from you at a price you'd happy/OK with.
The technique in the last segment on GPC of rolling up your short put might be the answer to my DITM AAPL covered call dilemma. Question: the new short put strike appears to be higher than the new covered call strike, is this effectively now an inverted covered strangle? I have been doing covered strangles and using the put premiums to help pay for my rolling the call strike up, but I have yet to select a put strike that is higher than the call strike! Assuming this increases the likelihood you will be assigned the shares, are you willing to take on more shares at such a high price if the stock were to have a reversal to the downside? Would you still deploy this method on an underlying that has become overbought on RSI and that you suspected might be due for a pullback, or would you hold off on raising that put strike in that case? Just upgraded my tier to the highest level because your content is so good, would love to touch base on Discord regarding this at some point.
Those are great questions! I always prefer to sell that CSP at or just below support. Although it might be higher than the covered call strike price, it should still be around a support area. I'm also willing to go farther out in time if it seems in our best interest to be able to sell a lower CSP strike price.
I always look at various expiration days and strike prices as well as how the technicals are looking on the daily and weekly charts to help me decide which options to sell.
In all cases, if I'm selling a CSP at a strike price above or below my covered call (PMCC) strike price, it's because I have position sizing available to add the position if it comes to that. If I don't have position sizing available, I won't do it.
Very profitable swing trader but recently began adding covered calls from my positions. Love your videos and video style, where have you been in my life? LOL
Thank you so much for that Dave! I really appreciate your support. 😊
Price of stock ABC is $10 when I sell a $15 call contract, just before expiration stock jumps to $25. Would you roll up and out if you're bullish about the stock? Also, if you roll it, would you keep any profit between the old $15 strike price and new strike price? Thank you
Hey Miguel that’s a great situation to be in. If I’m long term bullish on a stock, and it performs like your example, I will try to roll the CC up and out if I can do that for a good enough return. My goal is to always roll options for a credit if at all possible. If you haven’t seen it already, you might like to check this video out on rolling CC including ones that are DITM: ua-cam.com/video/cwoqR5fNHkA/v-deo.html
@@StockandOptionMyLifeOfLearning thank you for the quick response and thank you for providing us with all these great videos! New subscriber here
Hey Randy, just joined. Thanks for another great video. How about a video on finding good dividend stocks for covered calls.
Hey Tom thanks for your suggestion and support! I'll keep that suggestion in mind for future videos.
Wow what your said is that I’m dumb 😭😪😭I have so many stocks that I bought higher that what is trading now ,I was thinking about cover calls but I was afraid 😱 to loss my stocks at less money that what I bought them, so rolling over is the solution
But is better to sell to the 3 Friday of the month
🤔 I prefer the 3rd Friday in most situations. Here's a video I made on why: ua-cam.com/video/1Bl69YJ04cM/v-deo.html
Another great video! Why do you sell covered call and put at the same price of $82.50 ? What's the logic, just to collect more money? But you are prepared to buy GPC at $82.50 if it drops?? Another question: When you roll covered call to $87.50 and put to $90, the covered call is till ITM (stock price at around $94 when you roll it), it is quite a risky move cos the ITM covered call has a higher chance of assignment? Thanks for great sharing and your time!
Yes it does put more money in our pocket but if we sell a cash secured put option, we are always ready to have those shares assigned to us if that’s what it comes to. It also means that we don’t have a full position size in it already.
I guess a position being risky is really in the eyes of the beholder. But yes the farther in the money an option is, if you’re short the option, the greater your risk of assignment is, especially when there’s no time value left in the option. So if you don’t really want the option assigned, then it could be considered more risky. However if you don’t care if it’s assigned, then it actually might be less risky if it’s a CC.
Hey great video! If you have sold a covered call option at a strike below your assigned price (ie, strike: $50; assigned price:$70), and current stock price is ATM (ie, $51), and you are 2 weeks away from expiration, would you be willing to wait until 2 days before expiration (when the option price tanks) to execute a more profitable rollover?? If you wouldn't wait that long, please explain why you wouldn't wait. Thanks so much sharing!
Hey Diego thank you for your question and support!
For me, it depends on a couple factors. One of the biggest ones that I consider is if I'm OK if the stock got called away from me at that strike price. If that does not matter to me one way or another, but say I'd prefer that it does not get called away so I can keep rolling my short covered call up, then I look at if the stock is hitting up against some resistance. If it is, then it's possible that it will take some time if the stock is able to push through that resistance. That may take the two weeks that you were referring to, so we'd be able to let the time value dissipate, and have a roll order sitting out there to roll it up.
Either way I'd probably go ahead and place a limit roll order in case something happened with the stock and it moved around briefly very fast so that the order got filled. If I did not want the stock called away from me, then once the time value portion of the option was under $0.20 =/-, at that point I would really begin to look through all the options so it wouldn't be called away from me.
You do have to keep an eye out for someone doing dividend capture. For example, if the stock was about to go ex dividend, you want to make sure there's at least the value of that dividend in time value of the option otherwise the stock might be called away from you for dividend capture.
Interesting man, havent really done this before, very helpfull!
Thank you!
My advice: learn to trade options. I have started by learning about covered calls. They are awesome!
I totally agree with you. Thank you for your support!
Hey. Just found your channel today and Ive been bindge watching everything. I seriously needed help with options, and rolling. My AMC stock took off on me today and I didnt want to lose my shares, so I did a roll, but since I am experienced, I wound up taking a very low price (51) for end of next week, but I expect it to be 60 to 70 by then.
Is my only option to RE-ROLL it and put it another week out (if it continues to climb i will be stuck in the same postition this time next week)?
Also, how do you write a put option if you dont have 100 shares (you said to write puts if you dont have a full position)
I thought you needed to own 100 shares of any stock to do a covered call?
Thanks
Thank you so much for your support! That will be a big jump! If you want to try and stay ahead of the price increases, you might consider rolling it out to an expiration day farther than just a week. If you were long-term bullish on it, you might consider the monthlies or even something that's two or three months out. Here are a few more videos on rolling call options you might find helpful if you haven't seen them already: ua-cam.com/video/kHVQ7VpX4WA/v-deo.html and ua-cam.com/video/cwoqR5fNHkA/v-deo.html
When you write a put option, you don't have to own the stock. A put option allows the buyer to put stock into your account. If however you are writing a call option, if you have the 100 shares in your account for each one contract, then it will be called a covered call. If you don't have enough shares to cover the call option contracts you've written, then those uncovered call options are naked options.
This is hilarious. Same reason I am here. I have a 40 covered call that expires Friday. I like the idea of selling the put when rolling the cc but I need to understand the downside. This is a short strangle but a short strangle usually has the put at the same or lower than the call strike price. In your example, what happens if the stock does below the put but above the call strike? what if it closes above both or below both?
If the Stock closes below the strike price of the put option you sold, if you don't roll it out and maybe down then it will be assigned to you. If the call option closes ITM, and you don't do anything to roll it out before it's assigned, then that stock will be called away from you. So if you're covered call was ITM and you're short put option was ITM, if you are doing equal number of contracts for both, then the call option would call your stock away and the put option would put shares right back into your account.
@@StockandOptionMyLifeOfLearning This is golden. I wonder what the margin requirement is for that setup. I have a deep in the money covered call I wrote for 35, the stock is at 45 right now. I want to roll it 2-3 months down and up to at least 45, maybe even 50 and then sell the 55 or 60 put for the same expiration date. If it blows up and the call is ITM but the put is OTM, like if it closes at 61. I still get called away, but the put would be OTM so I would just keep that premium. Theoretically I could keep rolling both and then eventually just buy back one or the other. Did I get that right?
That sounds correct Chris. And the margin will change depending on price movement.
Is buy to close and sell to open the sane as a ROLL?
Hey Robert if it's done in the same stock and preferably at the same time then yes that's exactly right, it's considered a roll. You're buying to close the one that's nearer to expiration and selling to open another one to replace it that's farther out in expiration.
I am selling covered calls now but my account keeps going down, I don't know why. What can I do?
I'm sorry to hear that. Do you know what is the root cause for the account decline? Are the stocks you are selling covered calls on going down in value? Are you selling strike prices that are lower than where you bought the stock at?
Great video as always! But could you talk more about the strategy that sets an order out there and see if it gets hit? I want to learn more about it. Thanks!
Thank you for that. You might want to check out our monthly cash flow series of videos because in those videos I talk about two or three trades including why we did the trade or how we went about trying to fix it: ua-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html
Here are several more videos about technical indicators we use to enter new positions: ua-cam.com/video/PPS5TcCYMvE/v-deo.html and ua-cam.com/video/Ub9u7fZ0Lag/v-deo.html and ua-cam.com/video/9L8avDcF664/v-deo.html and ua-cam.com/video/AC62LCzApJg/v-deo.html
Hi, in your experience, does rolling covered call cause a wash sale? For example, if i sell covered calls weekly, then BTC to avoid assignment at a loss before end of week 1, then STO to week 2 and ends up making a profit in week 2, does week 1 loss violate wash rule or does wash rule not apply to premiums?
Hey Frank thank you for the question and your support! I I am not an accountant so I don't want to tell you what I believe is 95% right because I'm not 100% sure. I would suggest asking the person that handles your taxes. Each case could be different also depending on if you're considered a full-time option and stock trader or if it's a side job. I want to make sure whatever answer you get is 100% correct.
I have the same question. Did you find out the answer?
No, not yet. I plan to meet with my accountant in the next month or two. I’ll try to remember to ask him for future reference. But each state or country could be different so I would encourage you to check with a tax professional in your state and country.
Randy, love your videos. Could you do a video on how you put orders into IB for future roll orders, ie if the market moves it will be filled automatically.
Hey Garry thank you so much for that and for your suggestion! I think that's a great idea also. I'll see what we can do. ☺
What would you do with a covered call on JNJ 1/15/21 at $150?
If you were hoping to hold onto the stock then I would put a roll out there to roll that strike price up $5 to $155 and try and walk away with a small credit on top of that. It looks like JNJ is in a pretty good up trend and there's a lot of buying pressure in the daily and weekly volumes. Right now, as long as nothing changes, JNJ looks like it's heading up even though it is about to test his previous high. But the charts look bullish to me!
Is there any tax consequences of rolling a covered call vs. closing and rewriting?
I am not a tax professional so to get a 100% accurate answer, you should probably consult with one. However, to the best of my knowledge, it's pretty much the same thing as long as you're within the 30 day wash sale rule. Here's a video on that subject if you'd like to check it out: ua-cam.com/video/xdcQCKZtJhI/v-deo.html
How do you keep track of your roll? I feel like when I buy back at a loss, even though I sell another one for a credit, I still realized a loss on the one I closed. Hope that make sense
Thanks for the question and your support!
@@StockandOptionMyLifeOfLearning bro but are you gonna answer it? lol also i’m 5 minutes into the video but you didn’t explain what it means to roll a covered call option. this is my first time hearing about it and based on the video i think it means reselling another call option? or something
I believe I understand what you're asking here, if you buy it back at a loss then of course you did lose money on that leg. However if you simultaneously sell a new one in which you pocket more by selling the new one than the old one cost to buy back then in the overall position you could still be up. Personally, I keep track of the P&L of each position in an excel spreadsheet. Does that answer your question?
Thanks for pointing out that I failed to answer the question. 🙃 I try to respond to every question and comment and somehow I didn't respond properly to Sellers Lead's question which was a good one. To roll an option means that, if you sold an option to open a position, say for example last month, and it's now about to expire (so you want to close it out), then you'd buy the option back to close it and simultaneously sell to open a new option that expires next (or at a later) month. So yes you are correct. To roll (in this example) means you're buying to close the old one and as you mentioned, you're selling a new later month call option to open. Does that answer your question?
Thank you for your detailed explanation.
What would you do with an OXY 9/25 call at 15?
Hey Robert, thanks for the question. Are you long that 9/25 $15 call in OXY or short (is it a covered call)?
@@StockandOptionMyLifeOfLearning It is a covered call
Your position in OXY is similar to my Exxon Mobil position. It's reaching a previous low around $9 a share so there's the possibility that it could hit that and bounce for you but of course there are no guarantees. A lot of oil and gas Companies are getting hit pretty hard right now. If it were me, I'd try to sell my next call option around some sort of resistance and maybe also at or above a moving average. I'm not sure what your goal is with the stock, to hold onto it, or what your entry point was, so not knowing that I would probably look to sell the November $14 call option. It generates a decent cash on cash return and is right at the 50 day moving average. In order to get there it would have to work its way through a little bit of potential resistance around the $12 50 price as well. You could also just place a call order out there at a higher premium and maybe higher strike to see if it gets hit over the next week or two if there happens to be a bounce in oil. That's just my personal opinion not my suggestion Robert. Hopefully it gives you an idea of my thought process on a position like that.
I've been working with the options wheel since late 2020, this options Roll for covered calls is extremely useful, and my new way to make more gains. This video was spectacular with the explanations and examples.
Thank you very much for your support and feedback!
Do you ever sell covered calls below your cost basis because the stock has lost so much value with the idea that you will monitor the call you sold short and adjust if you see it working against you?
Hey Joseph absolutely! I especially do that if my cost basis is at or below what the stock is currently trading at. That way I wouldn’t feel too bad if it was called away from me. I made a playlist on how to repair option positions That have gone against you. If you’d like to check it out here’s the link to that video series: ua-cam.com/play/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9.html
I'm doing one tomorrow on apple
Hey Brandon sounds good. Let me know how it goes. Thanks for your support!
@@StockandOptionMyLifeOfLearning I am just going to let it expire. I bought some spare shares so that I can use the existing cash to roll back in
I don't understand the concept why are you selling puts and covered call at the same time with different strike price? Did you want your shares to be called away and put back your shares with your short put options? I got assigned with NIO back in mid February with strike at $52. I have been selling covered call to bring my average cost down. I do like to own NIO for the long term. Thanks for your advice about rolling covered call, I have 6 contracts with nio at $45 expiring June 18.
Hey Giang thank you for your questions and support! I’m not sure exactly which trade/position you’re referring to. If you have a specific part of the video in mind can you please send the timestamp? Overall though if we have a covered call position and we are selling puts on that same stock, either we are willing to add to the covered call position if the put got assigned to us or we are trying to use cash from selling the additional put option to roll the covered call strike price up. A third scenario might be if our put option is deep in the money and we are trying to generate additional cash by signing a call option that’s OTM.
@@StockandOptionMyLifeOfLearning thanks for your response, I rolled up my CC from $45 to $50 into July 2nd. Since I closed my CC for a lost of $1k and gained back $800. This still better than having 600 shares called away. If I get assigned by July 2nd I'm ok with my shares called away. I gained almost $3k by rolling my strike up. Thanks again for that advice about rolling cc, looks like NIO is on the move golden crossing coming. Will start selling puts again on NIO.
I'm glad it looks like it's working out for you. Let us know how it turns out.
I only roll if the strike price is below my original buy in price.
Thank you for sharing Michael and for your support!
Best content on internet.I have 30k account with IBR.Rolling positions is very expensive on this platform ,hence l let my covered calls run to expiration($30/transaction).? Also another question.What method do you use to tabulate all your transactions you show in your videos.Thanks Randy
Hey James thank you so much for that and for your support! 😊 That is a pretty hefty transaction fee! If you're located in the US you can definitely find another brokerage that will do better than that. If you're outside the US, I've heard it can be a challenge. Hopefully, international competition will get those transaction cost pushed down. To keep track of my trades, I use simple Excel spreadsheets.
Great information bro....Love from India
Thank you for your support!
i have 800 share of $AI stock. bought $21 got down to $12 and i seel call for 8 options strike $15 now i down 400% for sell call lost $8 thousand expr 2025 but stock up i profits $4000 but lost on sell call should i roll my options i don’t know i make mistakes. 😢
Mistakes are just a part of learning. Check out these videos, they might give you some ideas on how to fix the position: ua-cam.com/video/aK-nPXZ1hAA/v-deo.html and maybe this one as well: ua-cam.com/video/kHVQ7VpX4WA/v-deo.html
Just an example, if you buy xom at $70, stock drops to $45, you sell covered call at $50, if the position gets exercised at $50, wouldn’t you lose $2000 per contract for the 100 shares? Isn’t rolling down a covered call increase your loss potential?
I believe I understand what you're asking here. If you bought XOM for $70 per share, sold the $50 covered call option and then it was called away from you at $50 per share and you had no other trades or income from that position then you would lose $20 per share. However if you look at the overall position, let's say you've been rolling those covered calls for 6 to 12 months and you've also been receiving dividends, then your loss on the overall position wouldn't be as much because you would've been generating income by collecting the dividends and selling/rolling those options.
Does that answer your question?
Yes, thank you
"if the position gets exercised at $50, wouldn’t you lose $2000"
Yes, that is what would happen if you let it get exercised at $50. Selling a strike price BELOW your purchase price increases your loss potential.
DON'T let it expire below your purchase price. On expiration day, 30 minutes before the closing bell, buy to close the $50 call strike, and simultaneously sell to open another call at a further out of the money strike, at a further out in time expiration, to earn a net credit.
NEVER ROLL FOR A NET LOSS. ALWAYS ROLL FOR A NET CREDIT. Anytime you sell a covered call with a strike that is BELOW your purchase price (which I don't even recommend doing), you cannot set it and forget it like you can when you sell a call with a strike that is ABOVE your purchase price. You need to babysit the trade and keep rolling on each expiration day, until the strike is above your purchase price.
In the example you made of buying XOM at $70, and the stock drops to $45, you may want to consider selling an out of the money cash secured put with a strike of $40, IF you have the cash to do it. You collect better premium without the risk of being assigned by a $50 call, and if XOM drops below $40 by expiration, then you can roll the put lower again if you want, to an out of the money strike, with a further out in time expiration to earn more premium, while waiting for XOM to recover in price.
This also allows you to lower your cost average on your stock, if you choose to get assigned another 100 shares at $40. $70+$40=$110/2=$55 per share on 200 shares. XOM will recover to $55 sooner than to $70. If you have deep pockets you could sell 2 cash secured puts with a $40 strike to double the premium and to get assigned 200 shares at $40 and lower your cost average down to $50. You might be able to get decent premium on 3 covered calls with a $50 strike even if the market price is $40. AND you earn dividends on 300 shares in the mean time.
Knowledge IS power, only IF you apply that knowledge.
I'll bet you're glad you decided to hold on to XOM, now!
I started selling covered calls to generate retirement income on weekly options. My best week has been $3110. My biggest position is on TSLA.
Thank you for sharing.
Roll them over
Roll.
Great, you state that you generate roughly $10k monthly but with what amount of capital?
Hey Alfredo that amount has been increasing as I've sold off some real estate over the past several years. I made a monthly video series showing exactly how much cash we generated and the amount of capital we had set aside for those trades. If you'd like to check it out, here's the link: ua-cam.com/play/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9.html
It is only fair that I mention that the option I sell has a delta of around .17 on TSLA on a weekly some where around $700 on a single contract.
Thank you for sharing Bill!
selling put options WHILE selling call options? Huh? That's really risky stuff right there.
Thank you for your comment and support.
I sell call options generally, on stock that I already owned. So if if it's called away from me, I'm totally fine with that. Every once in a while I'll sell two call options against one long position like I talk through in my LEAP option video. That is more risky especially for someone newer to option trading.
I sell put options when I'm willing to have the stock put into my account. So for me personally, it's not so risky because I'm getting paid while I wait for the stock to be put into my account at a price that I'd be happy buying it up.
👍
Thank you for your support!
Normally roll
Thank you for sharing
Hopefully you are still holding XOM
I think I still own it in my outright stock ownership account, in which I buy stocks I plan to hold forever. But I’m not still trading it in my option trading account right now.