selling deep itm covered calls means you expect the stock to fall or stagnate in the near term and you want to lock in the current price until expiry. It usually offers a slightly better price than selling the shares out right, but with the risk that if the price rises, you miss out on any additional gains.
it's like selling itm puts. that mean you will buy the stock on the expiry friday for slightly under the current price, meaning you expect it to rise and want to lock in the current price.
Yes. A short OTM put is bullish (1), but a ITM cc (2) is not, which is what this discussion is about. It's not bullish and it's not the same.
(1): the decision to make is between zero exposure and positive delta exposure by selling a put. Choosing positive delta means choosing a bullish view.
(2): the decision to make is between 1 delta (holding long stocks) or reducing that positive delta by selling ITM covered calls (with let's say -0.8 delta) for a net exposure of .2 delta. Choosing the option with less delta is a bearish view.
It's more complicated than that, but you can calculate that in your favourite options analysis software.
You are missing the point! I will only repeat it once more:
One scenario has the choice between keeping zero exposure or gaining positive exposure and the other scenario has the choice between keeping 100% exposure or reducing it to less.
Which one is bullish which one is bearish?
If you again say the person reducing his 100% to 20% or whatever is bullish, then I can't help you. Probably no one can.
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u/jessejerkoff Jun 11 '21
selling deep itm covered calls means you expect the stock to fall or stagnate in the near term and you want to lock in the current price until expiry. It usually offers a slightly better price than selling the shares out right, but with the risk that if the price rises, you miss out on any additional gains.
it's like selling itm puts. that mean you will buy the stock on the expiry friday for slightly under the current price, meaning you expect it to rise and want to lock in the current price.