That's a great question! If you sell below your cost basis, you risk getting called away. That is something to consider. Are you willing to take a loss on your stock or ETF position if it goes down substantially from where you bought, say 10% or 20%? If the call option goes in the money for example before expiration, then you may be forced to sell your shares at not so good prices. I would say this is where diversifying between multiple ETFs and/or individual stocks becomes an important consideration. That said, looking at the beta of the stocks and/or ETFs along with the delta of the options can help to determine if there will be a higher chance of the option your selling going in the money (or in the favor of the buyer of the option). Hope this helps! Let me know if you have any other questions.
Interesting!
Would you continue to sell calls below your cost basis if you were just concerned about income?
That's a great question! If you sell below your cost basis, you risk getting called away. That is something to consider. Are you willing to take a loss on your stock or ETF position if it goes down substantially from where you bought, say 10% or 20%?
If the call option goes in the money for example before expiration, then you may be forced to sell your shares at not so good prices. I would say this is where diversifying between multiple ETFs and/or individual stocks becomes an important consideration.
That said, looking at the beta of the stocks and/or ETFs along with the delta of the options can help to determine if there will be a higher chance of the option your selling going in the money (or in the favor of the buyer of the option).
Hope this helps! Let me know if you have any other questions.
Good Info thanks
Thanks for stopping by my friend!