I missed this trade because of Yom Kippur. Would you still recommend making this trade tomorrow, Thursday, even if the price of the stock has gone up?
I do not understand how to place a stop loss on an options trade. It was my understanding that selling a covered call is in place of using a stop. Also understood that my shares of stock are sort of placed in escrow (i.e. held by my broker) if I sell a covered call…and that I cannot place a stop loss on these shares.
If the stop loss is placed on the option itself, how would that be done? The only type of option trade I am allowed by my broker is the selling of covered calls (to open) and purchase to close. If I were to put in a conditional buy order — to close — at 38.00, I would still own the underlying stock at a loss. That’s what happened to me with BAC in July.
Newbe here. Ugh, I have a 12hr/day job. When I get home, generally drained and too late to do anything but listen. When you propose a trade such as this, what is the time frame to get in? I don’t believe that I should buy the stock before hours for the next day. Many days, I work back to back…to back. Am I in a losing situation?
Not necessarily … you may just have to alter your trade strategies so that you can still trade but without additional stress on work days. For example – if you had taken the XME trade, you could set limit orders on both the stock and the call, before the market opened or after it closed. When the market pulled back on Thursday, those orders would have been more likely to get filled – and then you wouldn’t have stressed about buying at the top.
Another thing you might consider is getting yourself into a stock with much less volatility, and then trading options around your shares.
An example of this is a stock I am holding in an account, NAT. It has about an 8% yield right now, so I like holding the shares, even though the stock has been beaten up pretty badly in the last year. Something I do to generate a little more revenue on top of the dividend is to sell call options above what I see as resistance on the chart, and also sell put options below what I see as support. That decreases the likelihood of those options getting the stock put to me (or having my shares called away) and each time those options expire worthless, I have generated a little bit more profit without having done a thing with my shares.
There are many strategies with options that you can use to enhance your profit, provided you build that strategy around your personal investment style, your ability to monitor trades, and in your case – your work schedule.
Just some ideas I had in response to your post. I hope this helps give you some things to think about.
Thanks Dan – great explanation on a covered call!
I missed this trade because of Yom Kippur. Would you still recommend making this trade tomorrow, Thursday, even if the price of the stock has gone up?
I do not understand how to place a stop loss on an options trade. It was my understanding that selling a covered call is in place of using a stop. Also understood that my shares of stock are sort of placed in escrow (i.e. held by my broker) if I sell a covered call…and that I cannot place a stop loss on these shares.
If the stop loss is placed on the option itself, how would that be done? The only type of option trade I am allowed by my broker is the selling of covered calls (to open) and purchase to close. If I were to put in a conditional buy order — to close — at 38.00, I would still own the underlying stock at a loss. That’s what happened to me with BAC in July.
What am I not “getting” here?
Newbe here. Ugh, I have a 12hr/day job. When I get home, generally drained and too late to do anything but listen. When you propose a trade such as this, what is the time frame to get in? I don’t believe that I should buy the stock before hours for the next day. Many days, I work back to back…to back. Am I in a losing situation?
Not necessarily … you may just have to alter your trade strategies so that you can still trade but without additional stress on work days. For example – if you had taken the XME trade, you could set limit orders on both the stock and the call, before the market opened or after it closed. When the market pulled back on Thursday, those orders would have been more likely to get filled – and then you wouldn’t have stressed about buying at the top.
Another thing you might consider is getting yourself into a stock with much less volatility, and then trading options around your shares.
An example of this is a stock I am holding in an account, NAT. It has about an 8% yield right now, so I like holding the shares, even though the stock has been beaten up pretty badly in the last year. Something I do to generate a little more revenue on top of the dividend is to sell call options above what I see as resistance on the chart, and also sell put options below what I see as support. That decreases the likelihood of those options getting the stock put to me (or having my shares called away) and each time those options expire worthless, I have generated a little bit more profit without having done a thing with my shares.
There are many strategies with options that you can use to enhance your profit, provided you build that strategy around your personal investment style, your ability to monitor trades, and in your case – your work schedule.
Just some ideas I had in response to your post. I hope this helps give you some things to think about.
– Tim