How to Trade Covered Calls | Hedge Your Portfolio in a Bear Market
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- Опубликовано: 28 сен 2024
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Covered calls in this market are a hedge used to mitigate losses and generate income to lower your cost basis. Do not buy 100 shares for the sole reason of selling covered calls. You will lose money. Use covered calls in a tax-advantaged account to avoid short-term capital gains tax and paying taxes when assigned on profitable stock positions. Use of covered calls is best as part of The Wheel in a portion of your portfolio. Be careful of selling covered calls on extended legs down as you might catch a bounce and be assigned. Do not sell a covered call if you aren’t okay with losing the shares at the strike for the premium you receive. Selling covered calls with 30-45 DTE is optimal according to TastyWorks. I love you.
What is your opinion on selling weekly or shorter CC compared to the 30-45 DTE?
Because nobody has commented it yet: We love you too! Get better!
@@danieltjones01 more theta decay but higher risk of being assigned or becoming a bag holder, then being assigned below your cost basis if you continue selling covered calls
@@nafinbong9222 Why does the risk of becoming a bag holder increase? Nothing about the underlying has changed by changing my DTE? My logic is that the higher premium per day for a shorter DTE can reduce the cost basis quicker than just selling 30 DTEs. Only disadvantage I can see is the increased effort to repeatedly check / sell these say 8 CCs rather than a single monthly. I want to be proved wrong though before I go HAM on this and blow up, please.
@@danieltjones01 I sell weekly for less premium. Just scalping because I own alot of shares of alot of companies. (Retired dividend investor) aim for 6 or 7 hundred bucks a week.
Been trading 2 years and you’ve taught me so much, I showed my dad the og covered call video last month and taught him the wheel with your videos on Tesla. Hope you’re getting better brother, your fans have a lot of love for you!
You found a way to sell covered calls on videos you already own about selling covered calls on stocks you already own.
My man, you're a f@cking derivatives GENIUS!!!
My work on derivatives has gone derivative… holy shit
🤯🤯🤯
Quality content as always. Hope you feel better soon bro.
Man you say things in such a way that they make 100% sense. Which means i understand exactly what your saying. Doesn’t mean i know what im doing but i get what your explaining
I like selling calls on Monday for weekly when market open when it is most volatile so that I get the best price or credit.
It’s awesome to see you back. You simplify things so much easier than other channels. Thanks
Very timely video! Thanks!
Thank you for starting these videos again. I have been waiting for the new ones
ITM covered calls…better than selling puts?
You ma boi but u look like whitey from me myself and Irene in the intro as always great info tho
The goat is back 🎉
Tell me more about these.... packs of beer
Do you recommend selling around the .3 delta? I know this would be a case-by-case decision.
Definitely more case-by-case for sure, but I use 0.3 as a starting point and my default if I don’t have any real assumption of where the underlying is going to move.
good job
good job I want to produce a channel to explain this stuff as well since my friends dont understand I need to do it better. maybe this will help them.
So if I had 100 shares of AMD that cost me $6700, $67 each, and I sold a $72 call (2.3 premium), and it hit, I'd make $230 and lose $6470? I'm not sure I understand how that part works. That doesn't make sense.
You would get the gain of 72-67 on each share and would keep the 2.30 from premium
You’d make (72-67)*100=$500 in capital gains. You’d collect $230 in premium. Overall you’d make $730 dollars.
You bought low, sold high. That’s profit. Then you collected premium from selling the call. That’s more profit.
Thanks for clearing that up
Yeah the problem is I bought the shares and the underlying tanked 😭
Read pinned comment.
You have to buy the shares on a company you're HAPPY holding for the very long term. In other words, a company you believe will pay off in the log run, like Amazon or Google for example. Do you really care if Amazon goes down? Not really, because there's zero chance it goes bankrupt and it's going to come back when the Fed pivots and the recession ends, and blaze higher. So in the LONG RUN (years) your shares are valuable. If you're only thinking about the next 30-45 days you're missing the point of covered calls. They're for stocks you'd be happy to own for years through up OR down markets.
100 shares divided by 8? 😜
are you in the middle of a desert or something?
Thank you so much for producing content to the quality and level that you do bro. I hope you are able to continue to move forward and regain your quality of life! Much love for you and your brother, all the best dude!!!
Thank you!
Shamelessly reposting videos. I support this activity.
Thank God you are posting.
Hi, hope you are doing better health wise:). Question: what are your thoughts about having a portion of your portfolio selling calls on share you own that you don’t ever wish to sell? Example = MCD or another dividend king like JNJ? I under stand that it may be exercised but if you hold the premium & just buy back the stock as you keep rolling over the premium doesn’t that perpetuate a ongoing wheel or accelerate a general DCA strategy? Ex: buy 100 shares MCD, sell a covered call, collect premium, if out of the money you keep the shares/premium, if it is exercised you still buy back shares with with the sell of the shares at the exercised price & in both cases you buy more MCD with the premium you made. Plus the 2+% dividend per year.:)
Well summm ahhh dahhh beeech. I knew I should've learned about covered calls a long time ago.
What do you think about buying LEAPS on bond etf's? At some point the Fed is going to have to pivot, right? TLT was trading for about $150 before the rate hikes, now is trading around $105...
2024 of 2025 expirations may work
do other spreads please[iron concord ,fly] thank you
What happens if i sell an annual call and it hits the strike price a month later. Will I end up waiting the entire year before the call is exercised (i'm stuck with the option?)
Yeah, don’t sell annual covered calls. Sell 30-45 days out to capitalize on theta exponentially increasing.
You may get assigned early due to dividend risk or illiquidity, but likely you would be waiting that whole year.
@@InTheMoneyAdam thanks!
What about CC on AMC?
Sweet video man thanks!
ok.. so lets say we've sold a call on 100 shares.. and the price went down 5% over the call life.. so we lowered our cost basis.. but overall the value is still less than what we paid.. so then we would want to open another call? the scary thing is if we keep opening new covered calls at lower and lower strike prices in a bear market, we lower our cost basis a little bit, but we end up running the risk of getting exercised eventually because we are now unable to make any premium to sell a call at a strike price that is even slightly profitable for us.. then it gets dangerous..
Good to see you are well enough to start posting again
Great video but missed talking about the Rollout or Roll Up options if your call is in the money but you want to keep the shares or wring out some more premiums.
Why do you sell at the strike price and not hold longer for more returns if u want the stock to go up
If you think the stock will go above your strike price+premium, then you wouldn’t want to sell one.
I think you're missing the point mate. If you sell a call you're REQUIRED by contract to sell the shares if it expires in the money...you don't have a choice to hold on longer (unless you roll the option). In the case you talk about you'd either pick a higher strike price to sell, and live with reduced premium, or not sell an option at all.
The hard part is getting buyers in a bear
today bulls made money on those calls.
I LOVE YOU TOO! @0:16
Great clarity in your explanation for a Covered call! Thanks Adam. QQ, if the CC expires ITM, do you get the $5500 + premium back(i.e $5550) or just the $550+ the CC premium(i.e. 550)?
Let’s say you buy 100 shares at $10. You sell a covered call at $15 strike for 0.50 in premium. The stock blows past your strike and is at $20 (or anywhere above your strike) on expiration day.
You get assigned your $15 call.
You bought 100 shares at $10 and sold them at $15, making $500.
You keep the 0.50, or $50, in premium.
You make a total of $550.
So your initial $1000 used to buy the shares is now $1550.
@@InTheMoneyAdam got it, thanks
Covered calls and cash secured puts are the ish. I learned the way.
I didn't understand the title. in a a typical bear market you buy a share at price of 100$ and the stock go down at 70$(bear market like this year). Are you suggesting selling CC for example at 75$ to lower the cost basis and if stock bounces rolling over/up the CC to avoid assigment and to avoid selling stock at price below the cost basis?
You're better off selling out of the money calls (over $100) unless you actually want to exit your position.
Selling calls are a hedge against a downturn because the premium you collect offsets a negative shift in the underlying stock. They don't eliminate your potential for a loss, but they do offset it.
Or let it get assigned and sell puts again hoping to enter at a cheaper price
No