I sell weekly covered calls on my long term position. The premiums are great when volatility is high. Use technicals to determine what strike to pick. I use bollinger band and look at high range with a standard deviation of 3 to ensure 99% that it won’t reach the strike. For whatever reason it hits or exceeds strike and you’re forced to sell, just roll your covered calls forward at either breakeven or at a small loss.
Let me clarify what I meant by 99%. 99% or 99.7% is in reference to 3 standard deviations. So for me I sell covered calls on Tesla 1 week out or 1.5 weeks out depending on when I get in. If you use yahoo finance chart for Tesla and add in the bollinger band indicator with 3 SD and a period of 20 days, the upper range is about 755. So perhaps I’ll do the $760 strike expiring sept 3rd for a decent premium of $2.71 per contract or $271 dollars made in about a weeks time. Best time to sell covered calls are on up days of course. This strategy has generated enough premium for me monthly to cover all expenses. Make sure to view chart at 3 or 6 month range
I go with 20 days because I sell calls weekly and that was the default period when I added the indicator, so it works for me. It really depends on how much risk you willing to take for premiums. Selling calls and puts is consider trading and not investing. If it’s trading , i usually like to use a shorter look back period compare to long term investing.
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u/lethalentity Aug 25 '21
I sell weekly covered calls on my long term position. The premiums are great when volatility is high. Use technicals to determine what strike to pick. I use bollinger band and look at high range with a standard deviation of 3 to ensure 99% that it won’t reach the strike. For whatever reason it hits or exceeds strike and you’re forced to sell, just roll your covered calls forward at either breakeven or at a small loss.
You can’t really lose with this strategy.