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So I've spent three weeks selling short dated covered calls for COIN and walked away with a whopping $250 I didn't have before. Doesn't sound like much, but so far the stock has never come within $50 of my strike price. If, and I understand it's a big if, I keep this up for a whole year, I'll have earned over a 10% return on underlying assets worth $25,000-ish.
The first week was nerve wracking. The second week less so, except for one day where the stock shot up $30 intra-day with $50 left to go to my strike price. But with 3 days left, I sincerely doubted it wouldn't pull back. It did. The third week as soon as I sold my covered call a judge issued a decision allowing an SEC lawsuit to move forward and the price of the option I sold immediately got cut in half.
The more of these I successfully sell, the more I feel I have a buffer to close my position at a loss if things start going badly. I'm more shocked that there are enough degenerate gamblers out there willing to throw a Benjamin at the off chance COIN shoots up 50% in 4 days.
We shall see when I receive my comeuppance.
Have you heard the phrase. Picking up pennies in front of a steam roller? You're much better off in an index fund if youre looking for 10% returns.
In this case, he's covered since he owns the underlying security. So the worst that would happen is his COIN stock gets called away (at a very inflated price to boot).
Ah i missed that they were covered. Wouldn't that negate the inflated price thought? That is the whole point of the options people are buying.
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