The post seems to have fallen off as being too old.

I looked into selling covered calls. It doesn't seem to be that much money to be made here. Unless I just missed something.

My specific example is I have 100 shares of microsoft.
Per the original post, using non-volatile stocks is best.
Microsoft vs GME or Tesla.

So attempting to sell out of the money calls for microsoft say 280 while it is worth 260, say 2 weeks out or 1 month out, generally nets 10 cents per call.

GME a week out selling at say 500 while it is at 200 would gain 10 bucks.

Are you just holding a crap load to make a profit?
Having 1000 shares of msft would let me sell 10 calls and I would make a buck.

What am I missing?

You have bad data.
MSFT is $231. The April 16 250 Call is bid $1.08. The 240 is bid $3.
That's 28 days out. So in a year, make $3 12 times on a $231 stock, not bad. Even just $12 is a pretty good return in our super low interest rate world.


You can take it even further. The March 18, 2022 250 call is bid $18.80. Sure if MSFT keeps chugging along that will get exercised, but any hickup along the way before exercise, you've already got your $18.80 and you might buy it back for $5-10.

I see, so it is just moving it out further as well.
Thanks.

When picking your strike, most people try to stay around a .3 Delta... If you would've bought 100 shares today at 230, you could've sold an April 16 240 call for 2.30 at market close giving you 230.00 giving you a 1% return on your 23,000.00. In 28 days, if the price is over 240, you sell your shares for 1,000.00 profit giving you 1,230.00 in less than a month on a 23,000 investment (5.34%).

ETA - Also, remember that option prices are multiplied by 100 shares... so if you sell a call that is listed as .10, that will actually be 10.00. An option for 2.00 will actually give you 200.00, etc

yeah found that today when I did the sales of the calls.
I did it for a few stocks I have had for years, so if they do hit the strike price, it isn't a big deal, I would have made the most of my profit anyway.

I might up my holdings on a few if this continues to work for me to up the stocks I can do this on.

Regardless if it's a call or put I sell to open, when it fills, I'll immediately place a "good til canceled" order to buy it back for .01. That'll usually get you out of the contract a little early instead of holding until expiration, and then you can sell another for the next week or month. Or if there's a quick, sudden move that greatly reduces the price on the option where I can buy it back for 60% or more profit, I will sometimes go ahead and buy it back even if its only been a couple of days, wait for the stock price to bounce back, then sell it again.

Every single one I sold is in the money now. lol.

guess I will just buy the stock back after the contracts fill on friday.

I figured what are the chances RACE, MSFT and APPL will jump up in 2 weeks. they are normally pretty steady, but don't move 10 or 20 points. lol.
I tried too hard to stay close enough to make a few more bucks now.

Or you can sell puts on the positions you had at the strike you sold at, or a lower strike depending how bad you want to own the stock, how much the premium is, etc

I do OTM CC's on pumps with stocks like ROKU. You need to pick the right stocks, MSFT isn't one of them. The other thing is to be patient. If it's stagnant or taking a shit, you may want to wait for the pump. I generally do 1-2 week, depending on what it looks like, sometimes I'll do longer, then buy back on a shit, rinse, repeat. Timing everything perfectly is impossible, but if you play a handful of them, it's easy/free money. Basically you need to get in on movers early, hold, and when they get nutty, you can do OTM CC's on them for free money, while (ideally, depending), not getting assigned.

Example, if I have 1,000 shares of TSLA that I paid $450 a share for (current being $750) and the week looks like shit, I do a OTM CC at $800 @ 500ish per 100, free $500 per 100 if it doesn't hit $800.

I use covered calls to augment returns on some of my long positions.  For example, I picked up Draftkings at 18.98 and have used puts when it seems to be running low and I don't mind picking up some more and calls when it feels like it's near the higher end of it's range.  As of now, I have my cost basis down to 15.17 with a may21 65 call floating.  That is with my first call sale at 50 and using the premium to ride up the call to keep ahead of the stock.  A call is a derivative of the underlying and can be used to augment a position depending on your intent.  I intend to hold on to the stock for the long term and keep the call out of the money milking it for premium whenever I can.

Another example of a stock that has been volatile but not at the high end of its range now is Palantir.  I picked it up at 10.72 and used the same game plan as it's a long term hold for me.  My cost basis on that is at 4.07 now.  

I pretty much roll the calls each week with the expiry about 2-3 weeks out.  If the stock moves up sharply, I use the premium and time value to adjust keeping the call rolling and near the strike.

I guess I misunderstood how it worked.
I picked microsoft and race because they were pretty stable stocks that moved up, but not rapidly in general.
my thought was that if I sold calls on them, it would not be a lot, but a few bucks towards the bottom line, not expecting them to move say 10 or 20 points in a few weeks.

I wasn't planning on selling them, but if they sold I already had run them both up past 100 percent gain, so no big deal if I miss out on a couple of bucks at the end.
maybe buy them back if they come down etc..

I feel that waiting for a reason for them to move is counter what the goal was, or again, what did I miss?

Youre not missing anything, there isn't much to be earned by risking your position in the stock.

Generally speaking, if you're a long-term investor that buys individual equities, just keep it simple and stay away from the options.  If you have an outsized position in a specific name (e.g. you participate in an employee stock purchase plan) and want to reduce the size of the position over time, covered calls can be a good way to earn a little extra as they go out the door.

Covered calls introduce negative skewness into return distributions (undesired).  If you're trading them in a taxable account they are tax-inefficient, as option premiums are short-term gains.  They introduce additional transaction costs as well.

Larry Swedroe wrote a good article on this last year.  https://www.evidenceinvestor.com/are-covered-calls-too-good-to-be-true/

Thanks for the article. It makes some interesting points, but is also a bit dated.

I get that I haven't mitigated the downside and sold my rights to the upside swing.

cost is no longer an issue as I believe all or most firms have waived trading fees for everyone.

I only do this in an ira, so no tax implications.

I bought a few other stocks with intentions of doing the same like HOG, which also seemed stable and gave dividends while holding.

By selling a call out of the money you insulate yourself from both scenarios to some degree.  On the downside, your underlying may have gone down but it's mitigated by the call premium.  The value of the call also declines faster so you actually collect the premium faster.  You can then shift the strike down and scrape more value out of it.  Basically, in most cases, selling out of the money calls allows you to scrape more value out of a stock you already own.  As long as the premium supports the upswings, you are going to do better than just holding the underlying.  

If it goes down, you still got the premium which reduces the cost basis.  

If it goes up it moves into the strike which increases the premium next time you roll it.  

The worst case scenario is the underlying moves through the strike very fast and just keeps on rocketing up.  In that case, you end up paying more than the value of the premium to keep it close enough to the strike to still gain value from the premium.  You still make out but you miss a huge swing up that is statistically unlikely.  My example of DKNG above was like that where I had to spend some of what I collected in premium to buy it back up short of the strike but then it settled and came back down.  So, even with a 20% plus run up in a month, I was still able to come out ahead on the collection of premium and I still have the underlying.