Banc de binary boolector binary trading personal brokers24 comments
Zady trading options
Out of all the option trading strategies out there, buy write options are probably the least risky, especially done with underlying large cap, blue chip stocks. So first, what the heck is a Buy Write options strategy? What is the purpose of buying a stock and then writing a call option against it?
Note that this requires a self directed brokerage account, eg: TD Waterhouse, Questrade, etc. This was very straight forward. I just bought it like I would any other stock. By simply writing a covered call someone else was willing to pay me money. So why would someone else be willing to pay me money to buy the option I wrote? In this real life example, the future date I chose is in October, which is 7 months away.
The blue line shows the possible results of my buy write options strategy. However it outperforms the long only method at every point below the cap. The largest risk is if the stock drops very low by October and even though the option will expire without being exercised I will still be stuck with shares of National Bank which is worth less than what I purchased them for.
TD Canadian margin rates for all its customers is currently 4. Meanwhile National Bank stocks pay out 4. Options and the stock market can be risky. I like the buy-write strategy but I wouldnt use margin for it. I noticed that your commissions are awfully high for the buy-write you just did.
Do the Canadian brokerages not offer a way to do the buy-write in one trade? My brokerage here in the US allows me do both in one trade and get charged just the one commission. That will help out with the income you can receive if you really pursue this strategy. The commission is high for TD.
Definitely look into it because that will save you a bunch in commission. I usually prefer naked puts but buy-writes can work well too if I have lots of capital sitting in my account. Just buy-write with companies you want to own anyways. Too bad the premiums are counted as ST capital gains. At least here in the US they are. The right emotions to have are being both worried and hopeful. Why do you act as if you already won something? The first sentence of your post is misleading: I was ecstatic when I saw the money go into my account with my own eyes.
Just curious about the tax implications of this. My lazy butt would lose motivation if I had to keep track of this info numerous times per year for a relatively small amount of gain. I do keep track of all my option trades. In other words, if you believe in the stock markets, will you perform that much better to justify the risk and additional work?
I believe it does matter due to the law of attraction. I forgot about the assignment fee. I think I might close the call early and sell the stocks on the open market instead. Good luck with your call.
Commissions are NOT negotiable up here in Kanuckistan. Plus, TD Ameritrade is not available to Canadians. The best choice for low costs is Interactive brokers. And it has much better access to Canadian markets as well as global markets. I used IB in the past, but hated the platform. But those are one-off events for me. I also like to use it. I currently have a covered call with my CVX. Another way of looking at this move is by viewing the premium as cash back.
Lousy rounding is lousy. And as for will this work? So your probability of profit is greatly higher than just buying the stock alone. Covered calls is a proper way of reducing cost basis for your positions. Dollar cost averaging is a fallacy. Thanks for all the replies to the other comments. Very interesting strategy and I will always have my eyes on until I understand it better.
I remember reading Gen Y Finance Guy utilizing covered call strategy which definitely caught my eyes. Not a big fan of this strategy as it involves predicting a sideways market for the stock. I let the position expire. So I ended up keeping all shares. But now in August , I have a total of shares of National Bank since 1 new share is automatically purchased with each dividend payment so far.
Once your covered call is called away, you will have to pay that fee. Am I losing in this trade yet? The answer would be a no. Great way to create income… makes you not fall in love with the stock. Gen Y Finance Guy.
Covered Calls and Short Puts is something that should be in every investors tool box. They are really good portfolio enhancers. And in times of crisis premiums get fat and they offer good downside protection during a market decline. BTW, you can certainly get much better commissions. Also you can execute a buy write or covered call all in one trade order.
You can do up to 4-legs in a single order. If you are with TD Ameritrade then I highly recommend that you check out the Think or Swim trading platform that they offer. Lastly, when you contact support at TD to ask for lower commission, leverage your consideration to move over to IB. I have used this in the past to help friends who are just starting out get lower commissions. The Starving Artist Canada blerghhh. Hmmm, I thought they were available in Canada. Its all about cost basis reduction and increasing your probability of profit.
Chatter Around the World - 88 - Roadmap2Retire. I think this strategy is slightly better with index options. Beyond Borders Freedom How to make money in oil and gas industry.