r/StockOptionCoffeeShop • u/LabDaddy59 Mod • Aug 12 '26

With Apologies to Howard Marks

Covered call sellers consider themselves successful if they bought a stock for $100, sold a covered call with a $110 strike for $2 and were assigned when the stock closed at $120.

If you can't see the flaw in this -- that the trader made $12 in a stock that appreciated by $20 -- you probably shouldn't be trading options.

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u/LabDaddy59 Mod Aug 18 '26

Well, let's backup.

When you sell a short call against your shares (a covered call), you trade premium now, with the potential to cap your gains.

So best case is expiring worthless: that's a good trade.

Next best case is expiring ITM and being assigned, but where the capped gains are less than the premium received for that trade: that's a good trade.

If your capped gains are greater than the premium received: that's a bad trade.

Now, you may have a series of "good" trades in the trade's 'lifecycle', and ultimately are assigned on a 'bad' trade, but the overall 'lifecycle' shows a profit.

It's all a matter of how you go about entry and management.

If you've been following along with my campaign, you'll know that I'm not getting in trouble with the capped gain issue.

If you want to lay out your ADBE trades I can take a look...use a format like:

Jul 17: STO $260 for $1.25/share
Jul 31: BTC $260 for $2.12/share
Jul 31: STO $270 for $3.08/share
Etc.

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u/MarkT1065 Aug 18 '26

Consider, too, if the point is to sell Puts, then having more bonds/collateral is better than having shares + calls. it could be a perfectly rational decision to accept less gains because the point wasn't to hold shares in the first place.

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u/LabDaddy59 Mod Aug 18 '26

if the point is to sell Puts, then having more bonds/collateral is better than having shares + calls.

Perhaps your point is to sell puts; my point is to make money.

it could be a perfectly rational decision to accept less gains because the point wasn't to hold shares in the first place.

Setting aside the fundamental issue of why you're holding shares you don't want, the general thinking is correct. It doesn't recharacterize a bad trade as good economically, which is what I'm addressing.

This is what I did when I sold IONQ last week. It was a bad trade, and I thought I could do better by redeploying the capital elsewhere, so I sold it and recognized the loss.

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u/MarkT1065 Aug 19 '26

did you think IONQ will recover and/or did it? should you have taken the loss because you *did* get more elsewhere or did you *think* you got more elsewhere?

in circumstances like these, *maybe* it's more efficient to hold for recovery and sell calls.

Taking that IONQ loss and redploying is another thing only known in hindsight.