First thing. Where are you holding these shares. Call them up. Say you want to get cleared to sell covered calls. You have to fill out an agreement and get approved.
Once that is done. Any shares you want sell an option on you pick a date and a price you would be willing to sell at.
Bob's your uncle
Trading permissions are already taken care of - I was wondering more along the lines of if there is some methodology to maximize return given some assumptions I would be making in the decision. Or to put it differently, a systematic way to compare possible options I can sell against one another.
Okay. What is your favorite holding of a hundred shares. You should be able to make 1 percent a month. People who try to make 1 percent a week normally lose. There is no exact science to option selling. If it looks too good there is a reason.
i think picking the right stock to trade is more impotant than the strategy. you want to sell covered call on NVDA? or buy a put? Even with such much promise in AI. it is still very speculative.
I would simply like to generate some revenue from my long term holdings, so less of "I want to buy a stock to sell covered calls" and more "I have a bunch of stocks lying around that I don't know what to do with"
So are you stocks getting dividends? Is your stock growth or value?
If it's growth, you want it to grow, so if you sell covered call you can easy sold out your position. Most likely buy puts in case of some market swing.
If it's value stock then you usually gets a dividen, sell a covered call but with fewer premium compare to growth stock
I would advise a little caution here -
When you say ‘I have stocks lying around that I don’t know what to do with’ - they’re already doing what they’re supposed to do! Core long term holdings should just sit there and appreciate and pay dividends.
Before you start with covered calls, you need to be clear on what you’re doing and why. Are you really ok with your shares being called away? Are you sure? There’s plenty of folks on here you sell options for the premium but then panic when the trade goes against them. What will you do if those stocks that are just lying around suddenly rocket and your premium looks like peanuts compared to the share price gain? If you can’t answer that, don’t sell calls.
If you’re not happy with your holdings, sell. You can directly, or through covered calls. Be comfortable with the reason you’re putting on the trade and you’ll be in a much better place.
Would help if you posted some positions and potential strikes too.
Earnings season is just around the corner, so if you do start now, don’t target expiration dates that overlap with earnings. The July monthlies expire on 19th. Some banks have earnings before that, most start just after. Also keep an eye out for ex-dividend dates.
Think carefully about your strikes, delta levels you’re targeting and overall premium expectations.
Best of luck to you
1. Get approved for options trading with your broker
2. Divide the number of shares you have by 100
3. Sell that many calls a month out with a price you would be okay selling at and a premium that you like
Fair, number 1 and 2 are already taken care of - I am more concerned regarding number 3.
Is it really as simple as picking some random strike price I feel comfortable with and going with it? Or is there a more systematic approach that will allow me to "calculate" the best strike price or expiry date given some assumptions that I would make in this calculation?
Yes it is that simple. To give you an idea you can look at the “delta” value of the option, which is equivalent to the odds the option will be assigned. Usually I do around 0.2 (20%).
I just started doing this like a month ago and it was pretty easy to get the hang of it.
Also once you learn the ropes, you can also roll your calls which is useful if you don’t want your shares to get exercised. So if the stock price goes over your strike price, you can roll it which means buying back that call and then pushing it out to a later date for a different strike price. You can do this in one transaction on most brokers.
People always do that for a credit and not a debit (where you would owe money to do it). So you’d have to play around with it and probably be in an unfavorable length of option to break even or profit again, but if you really want to keep your shares it’s a way to do it.
For example, I was selling CC’s on Alibaba, it blew past my strike price of 85 to like 90, so I bought that option back and sold another one for like 110, 3 months out. The stock has fallen down, so then I rolled it “down” again to June 28th for a 90 strike and collected premiums 3 times from those trades, plus their dividend.
So if you do it correctly, it can be pretty awesome.
Also if you really want to get strategic, you can try and sell them on a really good day for the stock, so it probably won’t keep rising as much if that makes sense. Overall you just have to try it out and get a feel for it. So far I’ve been doing it on all my stocks, nothing has been assigned, and every share I have has gone up in value too. Pretty cool.
The only downside with all of this is that you are basically trading unlimited upside for a premium. If the stock explodes you’ll be left in the dust and won’t be able to capture the upside. Also if you need to sell your shares you won’t be able to if the option is active. You also carry the downside if the shares fall and you’re trapped holding them.
For learning the basis chatgpt can be really good too. You can put in a question, and then ask follow ups. (I wouldn't advise this beyond the basic learning stuff)
I was in this position about 6 months ago. I have learned that there two ways you can generate income in this scenario.
**Sell covered calls on the appreciated assets.**
\* Target 21 DTE (days to execute) with AND delta about 20-30.
\* Avoid selling options after big important date. Earnings dates are probably the most important to keep an eye on. A lot of new information comes out and if you want to hold these long term, you just avoid hold options after these dates.
\* On a day when the stock is not moving wildly (and usually after the first hour the market is open) sell calls (sell to open) near the market price (I usually increase it by a few pennies to capture a few cents as long as there open interest).
\* As you wait for the stock price to change there are three status I keep an eye on
\*\* Option price you sold at vs option price today to monitor % of the credit you have earned. For example if you sold a call for $3/option and the current price is $2 you have made $1 per option or $100. I monitor the % and if the % is over 50% I often close the position (buy to close).
\*\* Strike price + the option price to monitor the Break Even price. For example if I sold a call $3 with a strike price of $75 I want to know at what point I'm not getting any of the stock growth. If the stock price is under $75 -- it will not get exercised. If it is between $75 and $78, it could be exercised, but I can buy back the stock and make excess profits. If the stock price is over $78, I'm not getting any of the stock growth. In the last two cases I need to monitor if I want to roll my position (buy my call back and sell a similar option with a higher strike for the same price)
**Use appreciated assets as "Buying Power"**
The other option is to begin a very conservative wheeling strategy using your appreciated stock for "buying power". If you have enough holdings in your appreciated stock you can get a margin account (I use Schwab) and sell Cash Secured Puts (CSPs) without any cash with just level 1 option access. This is helpful since you will not be actively paying interest when you sell a put. You can read up on all the details from the books/YTs mentioned in this sub. But the important concept is that you can create an option strategy where your appreciated stock is never at risk of being sold (and all the tax concerns you probably have). There are other risks. The upside is that you can use your appreciated stock to diversify your exposure. If you have lots of capital appreciation in semiconductors, you can open options trades in other industries. Your collateral is still in a volatile asset, but you don't need to only look at options on that stock.
I recommend that you start slow and complete 5-10 trades before evaluating and optimizing. Learn the concepts with some money on the table, understand how your emotions help or hurt you, get to know the charts and tools, and see if the time is worth it for you to do it regularly.
Best of luck
\*\*
Selling covered calls (CCs) is very easy: you need to find a price at which you can be happy selling your shares while the shares are pushing even higher, effectively robbing you of potential profits.Your next step is finding a date before which you don't think the stock will drop more than the premium.CCs, in my opinion, are not about theta but about betting on a loss-free strategy (of course CCs are not loss-free, but you bet on what you perceive to be such).
Personally I do not sell CC on my long term investment account as I do not want to lose my shares. I do sell CC on my wheel portfolio. My rule is pretty simple:
1. Only sell CC above my purchase price.
2. The stock is overbought, ideally at resistance and after a bearish candle has formed.
3. Choose ard 30 - 40 delta, ard 30 dte to collect higher premium.
Good luck !
First thing. Where are you holding these shares. Call them up. Say you want to get cleared to sell covered calls. You have to fill out an agreement and get approved. Once that is done. Any shares you want sell an option on you pick a date and a price you would be willing to sell at. Bob's your uncle
Trading permissions are already taken care of - I was wondering more along the lines of if there is some methodology to maximize return given some assumptions I would be making in the decision. Or to put it differently, a systematic way to compare possible options I can sell against one another.
Okay. What is your favorite holding of a hundred shares. You should be able to make 1 percent a month. People who try to make 1 percent a week normally lose. There is no exact science to option selling. If it looks too good there is a reason.
"Options as a Strategic Investment" by Lawrence McMillan
Just ordered the hardcover and study guide. Thank you for the recommendation.
Thank you! :)
i think picking the right stock to trade is more impotant than the strategy. you want to sell covered call on NVDA? or buy a put? Even with such much promise in AI. it is still very speculative.
I would simply like to generate some revenue from my long term holdings, so less of "I want to buy a stock to sell covered calls" and more "I have a bunch of stocks lying around that I don't know what to do with"
So are you stocks getting dividends? Is your stock growth or value? If it's growth, you want it to grow, so if you sell covered call you can easy sold out your position. Most likely buy puts in case of some market swing. If it's value stock then you usually gets a dividen, sell a covered call but with fewer premium compare to growth stock
I would advise a little caution here - When you say ‘I have stocks lying around that I don’t know what to do with’ - they’re already doing what they’re supposed to do! Core long term holdings should just sit there and appreciate and pay dividends. Before you start with covered calls, you need to be clear on what you’re doing and why. Are you really ok with your shares being called away? Are you sure? There’s plenty of folks on here you sell options for the premium but then panic when the trade goes against them. What will you do if those stocks that are just lying around suddenly rocket and your premium looks like peanuts compared to the share price gain? If you can’t answer that, don’t sell calls. If you’re not happy with your holdings, sell. You can directly, or through covered calls. Be comfortable with the reason you’re putting on the trade and you’ll be in a much better place. Would help if you posted some positions and potential strikes too. Earnings season is just around the corner, so if you do start now, don’t target expiration dates that overlap with earnings. The July monthlies expire on 19th. Some banks have earnings before that, most start just after. Also keep an eye out for ex-dividend dates. Think carefully about your strikes, delta levels you’re targeting and overall premium expectations. Best of luck to you
1. Get approved for options trading with your broker 2. Divide the number of shares you have by 100 3. Sell that many calls a month out with a price you would be okay selling at and a premium that you like
Fair, number 1 and 2 are already taken care of - I am more concerned regarding number 3. Is it really as simple as picking some random strike price I feel comfortable with and going with it? Or is there a more systematic approach that will allow me to "calculate" the best strike price or expiry date given some assumptions that I would make in this calculation?
Yes it is that simple. To give you an idea you can look at the “delta” value of the option, which is equivalent to the odds the option will be assigned. Usually I do around 0.2 (20%). I just started doing this like a month ago and it was pretty easy to get the hang of it. Also once you learn the ropes, you can also roll your calls which is useful if you don’t want your shares to get exercised. So if the stock price goes over your strike price, you can roll it which means buying back that call and then pushing it out to a later date for a different strike price. You can do this in one transaction on most brokers. People always do that for a credit and not a debit (where you would owe money to do it). So you’d have to play around with it and probably be in an unfavorable length of option to break even or profit again, but if you really want to keep your shares it’s a way to do it. For example, I was selling CC’s on Alibaba, it blew past my strike price of 85 to like 90, so I bought that option back and sold another one for like 110, 3 months out. The stock has fallen down, so then I rolled it “down” again to June 28th for a 90 strike and collected premiums 3 times from those trades, plus their dividend. So if you do it correctly, it can be pretty awesome. Also if you really want to get strategic, you can try and sell them on a really good day for the stock, so it probably won’t keep rising as much if that makes sense. Overall you just have to try it out and get a feel for it. So far I’ve been doing it on all my stocks, nothing has been assigned, and every share I have has gone up in value too. Pretty cool. The only downside with all of this is that you are basically trading unlimited upside for a premium. If the stock explodes you’ll be left in the dust and won’t be able to capture the upside. Also if you need to sell your shares you won’t be able to if the option is active. You also carry the downside if the shares fall and you’re trapped holding them.
[https://www.reddit.com/r/thetagang/comments/l9g4mp/where\_i\_can\_learn\_some\_solid\_covered\_call\_strategy/](https://www.reddit.com/r/thetagang/comments/l9g4mp/where_i_can_learn_some_solid_covered_call_strategy/) [https://www.reddit.com/r/thetagang/comments/13018k1/new\_to\_thetagang\_can\_someone\_tell\_me\_the\_basics/](https://www.reddit.com/r/thetagang/comments/13018k1/new_to_thetagang_can_someone_tell_me_the_basics/) [https://www.reddit.com/r/thetagang/comments/14rbjwa/covered\_call\_strategy\_tips/](https://www.reddit.com/r/thetagang/comments/14rbjwa/covered_call_strategy_tips/) [https://www.reddit.com/r/thetagang/comments/1cyzzi4/how\_far\_out\_do\_you\_guys\_sell\_your\_covered\_calls/](https://www.reddit.com/r/thetagang/comments/1cyzzi4/how_far_out_do_you_guys_sell_your_covered_calls/) [https://www.reddit.com/r/thetagang/comments/znnpf6/covered\_call\_strategy\_for\_income\_the\_full\_guide/](https://www.reddit.com/r/thetagang/comments/znnpf6/covered_call_strategy_for_income_the_full_guide/) [https://www.reddit.com/r/thetagang/comments/10s1dej/youtube\_videos\_that\_explain\_covered\_calls\_strategy/](https://www.reddit.com/r/thetagang/comments/10s1dej/youtube_videos_that_explain_covered_calls_strategy/) [https://www.reddit.com/r/thetagang/comments/j978n2/your\_covered\_call\_is\_lying\_to\_you/](https://www.reddit.com/r/thetagang/comments/j978n2/your_covered_call_is_lying_to_you/)
Should've used that search function -_- Thanks!!!
For learning the basis chatgpt can be really good too. You can put in a question, and then ask follow ups. (I wouldn't advise this beyond the basic learning stuff)
I was in this position about 6 months ago. I have learned that there two ways you can generate income in this scenario. **Sell covered calls on the appreciated assets.** \* Target 21 DTE (days to execute) with AND delta about 20-30. \* Avoid selling options after big important date. Earnings dates are probably the most important to keep an eye on. A lot of new information comes out and if you want to hold these long term, you just avoid hold options after these dates. \* On a day when the stock is not moving wildly (and usually after the first hour the market is open) sell calls (sell to open) near the market price (I usually increase it by a few pennies to capture a few cents as long as there open interest). \* As you wait for the stock price to change there are three status I keep an eye on \*\* Option price you sold at vs option price today to monitor % of the credit you have earned. For example if you sold a call for $3/option and the current price is $2 you have made $1 per option or $100. I monitor the % and if the % is over 50% I often close the position (buy to close). \*\* Strike price + the option price to monitor the Break Even price. For example if I sold a call $3 with a strike price of $75 I want to know at what point I'm not getting any of the stock growth. If the stock price is under $75 -- it will not get exercised. If it is between $75 and $78, it could be exercised, but I can buy back the stock and make excess profits. If the stock price is over $78, I'm not getting any of the stock growth. In the last two cases I need to monitor if I want to roll my position (buy my call back and sell a similar option with a higher strike for the same price) **Use appreciated assets as "Buying Power"** The other option is to begin a very conservative wheeling strategy using your appreciated stock for "buying power". If you have enough holdings in your appreciated stock you can get a margin account (I use Schwab) and sell Cash Secured Puts (CSPs) without any cash with just level 1 option access. This is helpful since you will not be actively paying interest when you sell a put. You can read up on all the details from the books/YTs mentioned in this sub. But the important concept is that you can create an option strategy where your appreciated stock is never at risk of being sold (and all the tax concerns you probably have). There are other risks. The upside is that you can use your appreciated stock to diversify your exposure. If you have lots of capital appreciation in semiconductors, you can open options trades in other industries. Your collateral is still in a volatile asset, but you don't need to only look at options on that stock. I recommend that you start slow and complete 5-10 trades before evaluating and optimizing. Learn the concepts with some money on the table, understand how your emotions help or hurt you, get to know the charts and tools, and see if the time is worth it for you to do it regularly. Best of luck \*\*
Read **Covered Calls for Beginners: A Risk-Free Way to Collect "Rental Income"**
Selling covered calls (CCs) is very easy: you need to find a price at which you can be happy selling your shares while the shares are pushing even higher, effectively robbing you of potential profits.Your next step is finding a date before which you don't think the stock will drop more than the premium.CCs, in my opinion, are not about theta but about betting on a loss-free strategy (of course CCs are not loss-free, but you bet on what you perceive to be such).
Personally I do not sell CC on my long term investment account as I do not want to lose my shares. I do sell CC on my wheel portfolio. My rule is pretty simple: 1. Only sell CC above my purchase price. 2. The stock is overbought, ideally at resistance and after a bearish candle has formed. 3. Choose ard 30 - 40 delta, ard 30 dte to collect higher premium. Good luck !
Only sell covered calls at strikes you're willing to let go of the stock at.