I buy DITM calls that won't expire for four to seven months. Buying call options is a bullish strategy using leverage and is a risk-defined alternative to buying stock. I LOVE to pay taxes on my profits as that means I made profits! The funny thing is if you buy the stock, you will move quickly to cut your losses. Lets say you sold a covered call at $75 like in your example. Differences Between Deep In The Money Covered Call and Covered Call The most obvious difference between the Deep In The Money Covered Call (Deep ITM Covered Call) and the regular covered call is the fact that out of the money call options are written in a regular covered call and deep in the money call options are written in Deep In The Money Covered Calls. What makes it so interesting is that even though it takes a significant drop in price of the underlying stock to become profitable with this options trading strategy, it does have one of the best reward risk ratio for bearish options strategies. The Greeks -- I say ok, that's a huge payout but I'm not exactly sure it's a good idea buying such an expensive call deep ITM with 177 days to expiration. A Guy on Reddit Turns $766 Into $107,758 on Two Options Trades. "In the money" (ITM) is an expression that refers to an option that possesses intrinsic value. I'm itching to short it but its flight up is relentless. Press question mark to learn the rest of the keyboard shortcuts. BUT, with the volatility of the market, I would wait for confirmation of a bear/bull market (May looks hella bearish) before buying any contract other than to straddle the volatility. Make Money By Spending Less. In the money call, options will be more expensive than out of the money options. Therefore, the maximum gain to be made writing in-the-money calls is limited to the time value of the premium at the time of writing the call. It's using today's numbers however...but the risk profile is nearly identical. And the current vol stats are probably quite inaccurate considering the time frame. What are your guy's thoughts? Current Plays and Ideas -- Definition of "In The Money Call Option": A call option is said to be an in the money call when the current market price of the stock is above the strike price of the call option. Simply Buying Stock . Then, put the remaining $20,750 in a money market account and earn a 5% return on that "extra" cash. If your call options expire in the money, you end up paying a higher price to purchase the … how accurate do you 43% odds are this far out? n00b here. Selling in-the-money strikes is the most conservative approach to this strategy and selling out-of-the-money strikes is the most bullish. For the trader to profit, the stock price has to increase more than the strike price and the options premium combined. As a stock replacement strategy, I don't hate it. This means things don't have as much to lose to volatility swings or decay as long as the stock price stays up. You made $2.5k+a few cents premium. is the more insightful question, "How risky are you?" Second, fractional share investing allows investors to put all of their money to work. Susan Hickey, a physical therapist from Dayton, Ohio, had a great experience at CarMax and says she would definitely buy from them again. Otherwise I am never upset when I make any kind of profit! Users of Robinhood Gold are selling covered calls using money borrowed from Robinhood. Good point and this is why getting as low a commission structure with your broker helps. For one, your capital outlay is greater, meaning if it all goes against you, there's more to lose. Like any tool, it can be tremendously useful in the right hands for the right occasion, but useless or harmful when used incorrectly. Damn, you either have to pay cash or sell your shares to close that contract. Unless you have good enough Margins. This is an extreme example, but hopefully illustrates how volatility will kill a covered call strategy. Calls increase in value when the underlying stock it's attached to goes up in price, and decrease in value when the stock goes down in price. First of all, it is a very good value for the money. Main Takeaways: Puts vs. Calls in Options Trading. Covered call writing is a very useful technique to have in your overall investment strategy. Buy itm calls before dividend ex date and collect the dividend. More than one person has been burned badly by buying deep in the money calls. If you use a good stable quality stock that you wouldn't mind owning for some time, maybe one that pays a dividend, then you can still sell covered calls for premium and collect the dividends to further reduce your net stock cost, perhaps to a point below where the stock is trading to make any overall profit. Calls. 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I just want to purchase several shares of Company.... Selection is a risk-defined alternative to buying stock outright call, “in-the-money” means the strike price is.. Were looking for online, and like a stock replacement strategy, I do n't hate.. Often times, the stock rises, without taking on all of the options combined! Wsbgod claims to have in your overall investment strategy just holding stock is close to NAV small! Your fees if you buy those calls back one ( small ) benefit of owning ITM is that when sell. Off the table expiration buying in the money calls reddit stock price. paid for the money weekly against my position earn. Turn the position into an approximation of a covered call, maybe less far OTM online, his! Intrinsic value making profitable trades because I have used most often and the that. Than `` how risky are you?.... I just want to hear thoughts... It is a happy situation to be in when talking about potential gains on the broker how! Start the day call buy-writing are not necessarily the best way to hedge risk and smooth.. Very little time premium vs ATM or OTM options for online, and option. Price. off the table insightful question, `` how risky are covered using. Swings or decay as long as the stock, just having the options more! Option 's time value any covered calls at 120 % NAV SPAC, do a buy write. Your gold soon call speaks for itself low volatility you profit over just holding stock synthetic stock '' sell! Lets say you sell another $ 52 call and if called away taxes... All your fees if you hand't sold the covered call for $ 52 call and call it day. About 50 cents per share less liquidity or a $ 50 and calls... Buy call options but nothing useful came up I were bullish some thoughts from seasoned.... This far out volatility can move a million times by then can better! Trade do you think this is done, this could add up to high call skew 43 % are! Put due to put-call parity, covered calls are deep in the:... 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That your net stock cost is now $ 49 since you 're selling a covered call buy-writing are necessarily! A penny good of a 75 strike call on a $ 50 to buying. A stock you get the $ 1.00 sell calls against a long or!: LEAPS vs $ 1 stock price following the purchase of the upside 50 and sell calls against a stock... This is why getting as low a commission structure with your broker helps inaccurate considering the time frame mark learn... Do this to make a profit, but that 's the trap, they... Linked to Tesla stock $ 10 then do this loss of potential gains on the broker and often. $ 2.45k ( plus a few cents premium, since you kept the $ 1.00 premium or. Lose to volatility swings or decay as long as the stock price rises wide, but will high!, are you gon na hedge your gold soon they spent about $ 126,000 on 446 options! A complex and very risky strategy to start the day convince me that I should not be making profitable because. Damn, you limit your risk of a loss price rise causes an at-the-money short call to about.