http://www.ivolatility.com may have something that he is looking to to accomplish this.

I joined ivolatility a couple weeks ago. I've been really lazy trying to learn and use all the stuff they have available.

K, I wanted to pop this thread back up, because I've found a very very interesting strategy.

I started following this specific analyst and I love him. His strategies are nothing revolutionary by any means, but they are easy to implement, easy to follow, low maintenance, and are possible cash cows.



If you take a look at this chart, you see current Oct options that have the highest % premium relative to the stock price. The current criteria is that the stock would need to gain 20% for your shares to get called away.

I recently began implementing his september picks to generate extra cash flow.



The current one I've been doing is
Buy Delta (stock price 9.20) and sell september 10 calls for 1.35

Basically I can generate per every $920 I invest, I immediately get back $135. For them to call away the stock has to appreciate by september 19th to 10.55.

IF that happens, I get paid $10 for my shares, meaning overall for the position I get $1135 for a $920 investment. I still "make money" as long as the share price doesnt fall below $7.85 which is a drop of 15% in ~a month.





Most of these stocks are distressed, so to me, at the current levels it seems like the perfect strategy to implement.

I often sell covered calls but only on stocks I want to own otherwise, there are two stocks on his list I like and do sell CC's when I own them though. Not real crazy about owning any airline other than LUV but as long as oil heads downward and they don't crash a plane I suppose it will be profitable.

Jimbo

Really the downside is pretty limited to me atleast with DAL.

As the stock moves higher, roll your options... if the stock moves lower, roll your options.

This may seem like an ignorant statement, but at current levels as long as delta doesnt go busto in 9 months, after that you're playing with the houses money.

It was trading at $4 per share the middle of July.

Jimbo

I understand that. My point was that from a covered call perspective (generating income) it's downside is a lot less than a lot of other stuff.

on a $9.20 stock your getting 15% on your money to write a covered call. I know it's completely wrong to quote this from a dollar perspective, but if you buy 100 shares of Delta, it goes down 9 (busto) in terms of absolute dollars you lost 900. If you buy a $30 stock goes down 9, you still lost 900 but there is still more downside. Plus, it's hard to find option premiums that will give you 15% on higher priced stocks.

That is one ugly stock list. Packed with financials and homebuilders, any of which can go busto almost overnight. AMD is nearly assured of a painful death. etc, etc

I think I'd rather just sell the calls and forget buying the stock on a lot of those.

Bumping since there was a question about this on the front page.

Can we make this the master general options thread and perhaps put it in the sticky?

Interesting that this thread was bumped just before October expiry. Check the stocks in the above chart and you see why the option premium was so high. The top two on the list are gone, and the third one is a forced takeover.