jefflsmith 10:16 am on Wednesday, January 27, 2021
Tags: CoveredCall ( 58 )

New CC on KBH

First time taking a position with home builders. Good dividend coming up on Feb 3. Plan is to hold and roll for a few months.

fuzzballl 10:24 am on Wednesday, January 27, 2021

If your covered calls go in the money, do you go ahead and roll them up and out for a debit no matter what it takes to get them out of the money? I think I’m following that correctly. Every time I try that I catch the whipsaw back down. Looks like overall your stock picks do well enough to offset that type of stuff.

My biggest issue in 2020 was lost gains from covered calls getting demolished. Don’t ask how much that cost me! LOL

Thanks for the updates.
- jefflsmith 10:33 am on Wednesday, January 27, 2021
  
  Yes, I roll up. When I roll up I pick up a short term capital loss. I try and hold the shares for 12 months once I get into a position and sell (hopefully) for long term capital gain. Agree with you on lost gains…..but after tax removes some of the sting. I paid no federal income tax in 2018 or 2019. 2020 was a good year and I have to pay some…..but $45,000 on $300,000 of gains is okay.
  - jefflsmith 10:45 am on Wednesday, January 27, 2021
    
    I just checked for 2020…..I had $741,000 in long term capital gains, net loss of $401,000 in short term capital gains/losses. Pay 15% on $340,000 vs. regular tax rate on $741,000. Account is carrying substantial amount of unrealized long term gains I use to “titrate” against the short term losses with a goal of coming in at $0. I am not drawing a pension yet which makes it easier to manage…..
fuzzballl 11:05 am on Wednesday, January 27, 2021

I’m going to paper trade the KBH. If the calls are in the money on expiration day is the roll up and out to at the money for the next expiration?
- MikeL 11:14 am on Wednesday, January 27, 2021
  
  Why not just sell ITM put for Feb?
  43 PUT is at $2.75.
  More premium, lower BP and replicates CC.
  TOS is showing the dividend at $0.15
  - jefflsmith 11:42 am on Wednesday, January 27, 2021
    
    Yes $.15 a quarter or $.60 a year.
    If I sell Puts I usually go defined risk which reduces the net premium but avoids taking a serious hit. Interested in improving my knowledge and experience of when to use puts. In the past three months I have traded more puts than in the past 10 years so getting more comfortable with them. Most of the traders on options bistro sell puts which has me engaged in learning more.
    With covered call if it goes the wrong way I take a hit but still own an asset (stock) I can write calls against, collect dividends as a small upside.
    Premium from the short Put is short term capital gain…..prefer to hold stock for at least 12 months once I buy and pay lower capital gains.
    Tastytrade would not agree with how I deploy my capital (fully deployed, options close to expiration) and trade…..so watching a lot of their material and looking at ways to improve my trading.
    - thomberg1201 1:02 pm on Wednesday, January 27, 2021
      
      As I know all too well, if the short put goes against you, you will own the stock, often in my account for at least 12 months if it goes really wrong.
- jefflsmith 11:19 am on Wednesday, January 27, 2021
  
  I try to roll to ‘at the money’ within a day or two of expiry. Some of my stocks give a fair price the last two or three days before expiry. Other stocks make you wait until late on expiration day before offering a fair price. I try and build a data set on the stock as I go to understand fair value.For example on ABT across over 40 weekly rolls I have found….Diagonal Up…..costs $.59 on the $1.00 ….if I see the chance to roll up for less than $.59 I take it right away….Diagonal Down….generates credit of $.45 on the $1.00….so when rolling down if I get more than $.45 I take it. Vertical Up costs $.64 on the $1.00, Vertical Down generates a credit of $.15 on the $1.00. Watching the history makes it easier to execute on a trade or let it sit and not adjust. I typically roll down to ‘at the money’ versus letting it expire and opening a new trade on Monday. I would rather spend a few pennies closing the positions on Friday versus have the stock move the wrong way on Monday morning and it costs me more.
  - fuzzballl 11:30 am on Wednesday, January 27, 2021
    
    Thanks!

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