What strategy do you use for selling options? I’ve traded options in the past but sold my first covered call and it keeps bouncing in and out of the money. It has not got to BE yet, but I anticipate it will.
I have a number dividend producing stocks that I am long on and practice dollar cost averaging on. I typically sell OTM covered calls on these when they are trending downwards if they meet these criteria:
1: You need to own enough units of 100 shares to make it worth your time to watch
2: There needs to be enough implied volatility to create enough potential profit to make it worth your time to watch
If the PE ratio is reasonable, I will typically use this strategy during bear markets to make some extra revenue while waiting for a recovery. Your risk in this derivative strategy is that your covered calls aren't far enough OTM and when the underlying asset recovers, and your contracts get assigned causing you miss out on future growth above the strike price. The trick to getting into a strategy like this DURING a bear market when you don't aren't already in a long position is picking a stock that's stable enough to not tank but still has enough implied volatility to drive up derivative value.
If you're tech savvy, TD Ameritrades "Think or Swim" client has vast options for scripting trades and automating the process a bit, in addition to some pretty awesome scanning features.
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