Posted: 6/9/2025 12:22:42 PM EDT
[Last Edit: SteveOak][Edited]
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I would like to increase the earnings of the GE stock I hold. The stock is doing well, up 50%+ ytd, so I don't really want to sell it but I can always buy it back. What would be a good covered call strategy for GE? Thanks! |
N&MEM, SSDR, NRA Life Member
Epstein Scalia did not kill himself.
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
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I would like to continue to own GE stock. I would buy it back.
The stock is in an IRA so capital gains is not a concern, nor are commissions. I could buy a call further out of the money to cover. |
N&MEM, SSDR, NRA Life Member
Epstein Scalia did not kill himself.
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
|
Absent insider info you simply determine where you balance the premium income with the risk of selling your shares. I dabbled with selling covered calls of bitcoin. My shares were significantly in the green and I intended to hold them for some time to come. Since you're in the "I want to keep the stock and would buy it back if it sells" you should be biased towards the higher range of strikes to reduce the risk of execution as much as possible. I did that and I was making what came out to be something like 4-5% per year. That sounds great, but it quickly became a burden. Presumably you are significantly in the green on your GE? If so, and given the runup in GE stock lately, I would be considering if now might be a good time to sell covered calls at aggressively profitable strikes. If they execute you sell at a profit, if they don't you pocket significant premiums. One thing I learned is that it is uncommon for options get exercised before the expiration date. I had a couple times where my covered calls went into the money for a short time and then dropped below the strike price without getting executed. |
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You are going to lower your overall returns on GE stock by following this strategy presuming it's disciplined and regular in nature. You might get lucky for awhile and mistake that for being good. In fact, you most likely will get lucky for awhile and mistake that for being good. It's kind of like the Martingale strategy of equities. You'll score dozens of little wins for every big loss (getting exercised and having to buy back higher) but over time those big losses will more than make up for the little wins thus causing your strategy to under perform relative to just buying and holding GE itself. I can understand how the covered call strategy appears attractive but all you have to do is look at every virtually fund based on a covered call strategy in the history of the market and observe the chronic under performance relative to the underlying assets on which those call options are based on. If Wall Street after hundreds of attempts can't put together an outperforming strategy based on covered calls, what hope do you have? |
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I will add however that there is ONE scenario where the covered call strategy actually works really well. If you have a particular position where you INTEND to sell at a particular target price. Then it makes sense to collect premiums until that target price is hit and you get exercised. You have to be committed to that price though for it to make sense. |
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Thanks for the great responses. Yes, I am using this position, significant so. On the order of 100%. |
N&MEM, SSDR, NRA Life Member
Epstein Scalia did not kill himself.
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
|
I ended up selling most of the GE stock I had. Sold the last bit at $274.35. That was in the top side wick of the highest candle of the day. In January is was around $170. |
N&MEM, SSDR, NRA Life Member
Epstein Scalia did not kill himself.
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
Gun control is literally Hitler.
Trump's actions? Watergate does not bother me, does your conscience bother you?
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