Actually, I'm a big dilettante in option strategies.. But it still doesn't reach me, how can you get from 20% to 30% guaranteed return on a covered call option + Dividends (shorts колл ociona + long promotions + share dividend).
In general, there is such a multiple world champion in trading (http://www.worldcupadvisor.com) Chuck Hughes. This site shows its profitability — the largest of those present there. Trades stocks + options.
Go to his personal site http://www.chuckhughes.com/
There he describes his strategy, which has already earned several million. Offers to download your tax returns and statements as evidence. His strategy is:
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I have found the cash dividend strategy to be the best approach for current market conditions. The cash dividend strategy generates cash income from the sale of “covered” options. Many investors are not familiar with the concept of selling option premium to generate cash income. When you sell an option, cash is immediately credited to your brokerage account.Selling options to generate cash dividends is very different than the traditional stock dividend strategy which requires you to own a stock for a year in order to receive a 4% or 5% annual dividend yield. Most stocks don’t even pay a 4% or 5% annual dividend. When you sell options, you can get paid up to a 20% to 30% cash dividend “up front” when the option is sold. You get to keep this cash dividend regardless of the price movement of the underlying stock.
Selling covered options can realistically produce a 20% to 30% or higher cash dividend that is instantly credited to your brokerage account when the option is sold. The key to selling option premium to generate cash income is to make sure the option you sell is “covered”.
There are two ways to implement the cash dividend strategy:
-Purchase stock and sell a call option
-Purchase a call option and sell a call option with a higher strike price to create a spread (put options can also be used)
Limited Risk Strategy
With both methods the short option is “covered” by owning the stock or owning a call option. Because the short option is covered this is a limited risk strategy. Receiving a 20% to 30% cash dividend reduces risk considerably. The cash dividend strategy incurs less risk than owning a stock or owning an option.
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Briefly, as I understood the meaning of this, that a call option is being sold simultaneously with a long share for which dividends are planned. Writes that with this combination, the risk is limited, с чем я бы поспорил так как если stock сильно падает, then the risk in my amateur opinion will be unlimited. But he assures that a protective airbag is formed in 20-30% by selling a call option. The pillow is formed, but I can't believe it's so big.
It is necessary to check with an example. Opening TOC, looking for a company that pays dividends in the near future. here you go, today is the last day at ABT (Abbot Laboratories), dividend $0,4 per share. share price 55,29. Looking for January expiration — strike call option 57,5 can be sold at $0. This option is not suitable. We open the February expiration — strike call option 57,5 can be sold at $0,3. That is, it turns out an airbag for the underlying asset of only about 0,5%, but not at all 20-30%. Even if we add the dividend, which is going to get 0.3 + 0.4 = 0.7 — we get a pillow just in 1,2%.
Let's say that we still made these deals and held positions for a month and a half before expiration, and let's say that we were lucky and the share price remained the same as it was. What we have as a result. Let's say you bought 200 shares We have in the asset 80 dollars of dividends and 60 dollars for selling a call. Total 140 Dollars. The dollar position was $11 058. That is, from this transaction they earned only 1,2% in a month and a half. Where are the promised Chuck Hughes 20-30%?
ZY Even if you sell an expensive option with expiration in January 2011 of the year, behind 2,20 and then we get only in the best case 4,5% per annum holding the position for a whole year.
