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Subject:  Re: Alan Ellman's Covered Call Writing Date:  8/17/2019  12:48 AM
Author:  JabberStokky Number:  115490 of 115812

Hi Denny, I'm very happy you're enjoying this book. I've found it to be a fun read, and I definitely learned some interesting strategy possibilities.

I spent yesterday evening doing some math with covered calls (because clearly that's the perfect Friday night activity). I've been using Excel to play with some scenarios. And in a way I like it - doing things manually lets me play around with some of the numbers to see what I'm getting.

And what I found is, indeed: the best ROO (return on options) is from calls that are at the money or very closely in the money. Not too bad (ROO) at very slightly out of the money calls either, you get upside opportunity but no downside protection - so end of day depends how bullish/aggressive you are. (a whole different topic I've got a lot of thoughts on! perhaps I'll write about this on Monday - I need to not be stuck at my computer on a beautiful Saturday ;) ) And of course as Ellman says, ITM have higher deltas vs OTM, so unwind scenarios (if required) are easier too.

Another thing I found, the best ROO (whether just return on options or even including upside potential) comes from calls with expiry close. That means, weeklies are more profitable than monthlies - have you found this to be the case? It makes sense logically (thinking about IV) but I've only looked at a few scenarios, my math isn't comprehensive. But I'm at the point where I think, if a stock doesn't have weeklies, I may as well ignore it.
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