UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev | Next
Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 11006  
Subject: Re: Pros & Cons of Selling Covered Calls for Inc Date: 5/4/2013 9:26 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
I'd recommend you only sell calls were you are getting paid enough for your loss of opportunity for capital gains.

Exactly right!

Option pricing is not driven by interest rates so much as by volatility, strike price and time to expiration. Volatility tends to be low in oversold or rising markets and high in overbought or toppy markets. The Black-Scholes option pricing model does not take into account market direction. When markets are rising volatility is low making options cheap and that problem is compounded for the seller by the higher likelihood of having the stock called away as the market rises, a fact ignored by the Black-Scholes option pricing model.

The OP is right, bull markets are generally not a good time to sell covered calls.

Denny Schlesinger
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Value Hounds

Ubiquiti Analysis
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement