Views On Some Covered Calls

#1
HEY GUYS,
I AM THINKING OF SELLING FOLLOWING COVERED CALLS AFTER GOING LONG ON THE UNDERLYINGS:
1. SBI
2. IDBI
3. GAIL​

I EANESTLY SEEKYOUR VIEWS.

hsarora47
 

SGM

Active Member
#2
hsarora47 said:
HEY GUYS,
I AM THINKING OF SELLING FOLLOWING COVERED CALLS AFTER GOING LONG ON THE UNDERLYINGS:
1. SBI
2. IDBI
3. GAIL​
I EANESTLY SEEKYOUR VIEWS.
hsarora47
Hi
After i read about covered calls in a book, I thought I may have found the "Holy Grail!". If one is getting 5-10% per month and the low risk, that the author promised, why do we do anything else at all!

Well that was about a year back. But eventually I discovered that selling Covered Calls is nothing but an equivalent trade to selling naked puts. The RRR is same (or little better for puts) and the trade management is same, and yes, you pay less brokerage by abt 10 times (assumming you pay 0.50% for cash on both side and 0.05% for options on both sides, covered call cost works out 1.1% + taxes, where as selling naked puts sets u back by 0.1% + taxes).

Then why do the covered call at all? Well the promise of owning the UNDERLYINGS, gives us a feeling of saftey. Also selling naked puts looks very speculative:eek: as compared to doing a covered call :p .

hsarora47, would you considered selling naked puts for the above scripts, if yes, then the Covered Calls is right for you!

Do give the strike and expected premium to do the RRR and compare it to equivalent puts available.

Regards
Sanjay
 

vince

Active Member
#3
hsaroroa47,

Covered call as a strategy is normally used by long term investors who are holding the reqisite shares in the contract lot size in their dp. The calls sold against these act as a supplementary income to the appreciation of the share value over a period of time.

However if you are planning going long on the futures and selling calls against them, .... not my cup of tea.

Regds
 

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