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No. of Recommendations: 8
Zy,

You can't play the IFism game unless you want to drive yourself crazy. Everything is random. No one knows anything and the clarity of hindsight is truly amazing. It took me 10 years to internalize this lesson. I hope you can do it sooner.

COO worked out poorly for me. I got in at 237.29 after which COO tanked. I sold $230 calls for 8.61 (which given my purchase price maybe I should not have - thoughts?) Then, and only then COO started its ascend. Ah well. A total of $1.32 in profit (bar possible costs for the execution of the call) – 0.5% in profits! Not exactly what I call North Star beating performance here.

Beats the loss after it tanked, no? Actively managing the UL turned a loser into a small winner. COO could still be sitting at its lows, in which case you'd have made your position 8.61 less painful. Since you have no idea what the UL will do, you might as well sell calls.

My main question is: when does it make sense to write covered calls that if executed effectively lock in a loss (or, in this case, basically a wash)?

If you're in a losing position, it always makes sense to write CCs to reduce your basis. You have no idea what the stock will do, you might as well play defense and take some of the sting out. The best time to sell CCs is when the stock is nearing all time highs and you get an uptick in volatility. But usually that uptick in vol comes with a downtick in the UL.

We have a great team at PRO, but not even they can predict what any stock might do. Again, the market is random and so are all things in life for that matter. Luckily for us, most of the time we live inside the standard deviation.

Cheers,
Travis
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