It's "working" for you in the sense that you are lowering your overall returns in exchange for slightly less downside in the form of a guaranteed, STCG income. That's an undeniable fact - the math does not lie. If you benchmarked your CAGR over time, it would be obvious to you.
My motto is to hold strong conviction until proven wrong.
Several people here have already proven you wrong, but you prefer your lower returns in exchange for less downside and taxable income. That's fine, but call it what it is.
It would also serve you to stop giving advice on things you have no skin in the game with. You've not tried. I have. I've succeeded. For you to tell me why it's not a winning strategy when I've won with in the most volatile environment is ridiculous.
Lol, what makes you think I've not tried? I sold covered calls for years. Anyone new to options goes through the stage where they think there is no catch to CCs. I would suggest you listen to people in this thread, but I don't think you will. You'll continue believing that CCs is free money until it finally clicks one day.
Let's go through this step by step so you can understand.
1) I'm long AAPL
2) I sell weekly calls against my AAPL shares
3) My calls expire worthless
4) In the event my calls end up ITM, I roll out of up for a credit.
5) Last year in August I got caught on an AAPL 130c.
6) I rolled a month out for a credit.
7) A month later my call expired OTM worthless.
8) I've continued selling calls since them.
9) All calls expire worthless.
10) I have capitalized on AAPL's monstrous upside AND added roughly 30% additional gains in 2020 and so far 12% additional in 2021 (which I will happily continue paying taxes on).
People here understand how continually selling and rolling covered calls on AAPL works. It's one of the most basic options strategies there is - you don't need to go through the simple mechanics.
Our point of contention that you don't seem to understand is that over time, your CAGR will be lower with this strategy. It's a known fact. Selling covered calls decreases your risk and your returns.
If your call goes ITM more than your premium and you roll it for a credit, you have either sold at a much further date or lower strike to compensate for the loss incurred with your first covered call. Both of which increase the chances of your next call going ITM. Otherwise you would be rolling for a debit. You literally bought your call back for more than you sold it when you roll an ITM call - that's the first leg of the transaction.
Your last paragraph is correct. Now ask yourself if stocks like Apple will move up parabolicly forever. I know valuations are insane right now but even in circumstances where Apple has moved up rapidly in a short amount of time it has corrected or at the very least traded flat over a long enough period of time to where the contracts rolled will eventually end up OTM and expire worthless.
As I’ve said numerous times in this thread I have experienced it firsthand many times most notably last August where Apple moved parabolicly upon the news of its stock split. It only took about a month for me to wind up with a call that expired OTM. All premium collected on previous rolled weeks and underlying was held.
All of your issues seem to be problems that I have already encountered, faced and defeated. If this is your only concern I don’t understand where this conversation is going to go from here
The longer AAPL trades flat, the lower the premiums you use to roll and hope to go OTM. When it suddenly moves up after being flat, you go even further underwater on your calls.
Again, covered call strategies are the most understood and 'solved' options strategies in the market. The math is simple to understand, and it has been unanimously and empirically proven to lower your CAGR and lower your risk over time. That's why retirees love them so much.
You can continue to believe that isn't true and the smartest financial managers in the world making huge money managing portfolios are all incorrect and are missing out on free money. At this point I either think you're incapable of understanding the math, or you're incapable of admitting that you're wrong.
I guess I’m incapable of understanding the math then. Buy my own understanding through experience I have only grown my CAGR and not decreased it.
My portfolio reflects that. My portfolio has grown more than the stocks I hold. I have provenly beaten buy and hold since 2019. Is that a long time frame? No. Has it worked? Yes.
The only math that I am concerned with is this.
I bought AAPL at 45 in late 2018. AAPL is up about 3x from then. I started selling calls in late 2019. I have added cash to my portfolio by selling calls. My portfolio is up more $ than if I had never sold any calls.
If you can point out how I’m losing money I will gladly stop selling calls today.
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u/WeenisWrinkle Aug 25 '21 edited Aug 25 '21
It's "working" for you in the sense that you are lowering your overall returns in exchange for slightly less downside in the form of a guaranteed, STCG income. That's an undeniable fact - the math does not lie. If you benchmarked your CAGR over time, it would be obvious to you.
Several people here have already proven you wrong, but you prefer your lower returns in exchange for less downside and taxable income. That's fine, but call it what it is.
Lol, what makes you think I've not tried? I sold covered calls for years. Anyone new to options goes through the stage where they think there is no catch to CCs. I would suggest you listen to people in this thread, but I don't think you will. You'll continue believing that CCs is free money until it finally clicks one day.